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China Money January 2023

China: New loan growth beats expectations in January

In January, Chinese banks distributed CNY 4,900 billion in new yuan loans, up from December’s 1,400 billion figure and beating market expectations. New loans tend to be stronger in the first month of the year, but January’s reading was also higher in annual terms. This was a reflection of the end of the government’s Zero Covid policy, and banks responding to regulators’ requests to boost loans. Money supply, in line with the Central Bank’s desire to keep ample liquidity, grew 12.6% in year-on-year terms in January compared to December’s 11.8%. Meanwhile, the stock of total social financing (TSF)—a broader measure of credit—increased 9.7% in January (December: 9.6% yoy). Finally, the PBOC kept its key policy levers unchanged over the last month.

Looking ahead, the post-Covid recovery should boost credit demand, and will likely also reduce the need for further monetary easing; The Consensus is for key policy rates to end 2023 close to their end-2022 levels.

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