China: Credit conditions tighten in April
In April, Chinese banks distributed CNY 1.5 trillion (roughly USD 230 billion) in new yuan loans, below market expectations and down from March’s CNY 2.7 trillion figure.
Annual growth in the stock of total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—fell from 12.3% in March to 11.7% in April. Moreover, annual growth in M2 money supply fell from 9.4% in March to 8.1% in April. All in all, April’s figures are likely a reflection of the government’s efforts to gradually rein in credit now that the economy is growing strongly, in order to guarantee financial stability.
Over 2021 as a whole, credit growth is likely to be notably slower than in 2020 as the PBOC unwinds Covid-19 relief measures and seeks to limit financial risks—particularly in the property sector. However, most panelists see key interest rates staying unchanged this year.