China: Credit data disappoints in February
In February, Chinese banks distributed CNY 1450 billion in new yuan loans, down from January’s 4920 billion figure. While the slowdown was to be expected, as firms frontload loans at the start of the year, February’s reading undershot market expectations. Money supply rose 8.7% year on year in February (January: +8.7% yoy), also below market expectations. Meanwhile, 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—expanded 9.0% in the month (January: 9.5% yoy).
Regarding monetary policy, the Central Bank has left key interest rates unchanged over the last month, after cutting the reserve requirement ratio in early February. Our Consensus is for mild monetary easing by end-2024, though the scope for large rate cuts will likely be constrained by the need to protect banks’ profit margins.
On monetary policy, United Overseas Bank’s Ho Woei Chen said:
“We still expect the PBOC to moderately increase monetary policy support this year with the 1Y LPR likely falling to 3.20% by end-4Q24 while the 5Y LPR may stay on hold at 3.95% through the rest of 2024. PBOC Governor Pan Gongsheng also suggested room to cut banks’ reserve requirement ratio (RRR) further.”