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China: Credit indicators show mixed signals in March

April 15, 2014

New yuan loans totalled CNY 1.1 trillion (USD 169 billion) in March, which was well above the CNY 645 billion recorded in the previous month. The print overshot market expectations of loans totalling CNY 1.0 trillion. In the 12 months up to March, new yuan loans totalled CNY 9.1 trillion (February: CNY 9.2 trillion).

Total social financing-a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments-expanded strongly from the CNY 939 billion recorded in February to CNY 2.1 trillion in March. The reading overshot the CNY 1.9 trillion that market analysts had expected. Meanwhile, in order to manage liquidity from the money market, the People's Bank of China (PBOC) continued to conduct its twice-a-week reverse repurchasing operations.

Annual M2 growth, the broadest measure of money supply in China, decelerated sharply from 13.3% in February to 12.1% in March. The moderation undershot market expectations of a 13.0% increase and represented the lowest rate on record.

According to analysts, the lower than expected M2 growth mainly reflected slower capital inflows and a net withdrawal from the money market in March. This also represents yet another sign of softening growth momentum.

FocusEconomics Consensus Forecast participants expect M2 to expand 12.9% in 2014, which is unchanged over the previous month's forecast. In 2015, the panel sees M2 growth of 12.7%.


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China Money Chart


China Money March 2014

Note: New yuan loans in CNY billion and year-on-year variation of M2.
Source: People's Bank of China (PBOC) and FocusEconomics calculations.


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