City skyline in China

China Money February 2020

China: New yuan loans disappoint in February, while M2 growths jumps to two-year high

In February, Chinese banks distributed CNY 906 billion (USD 130 billion) in new yuan loans. The reading came in well below the CNY 3.34 trillion recorded in January and undershot the CNY 1.10 trillion that market analysts had expected. In the 12 months up to February, new yuan loans totaled CNY 16.9 trillion (12 months to January: CNY 16.9 trillion).

Meanwhile, annual growth in M2—the broadest measure of money supply in China—jumped from January’s 8.4% to a two-year high of 8.8% in February. The print overshot the 8.5% increase that market analysts had expected.

Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—plummeted from CNY 5.07 trillion in January to CNY 855 billion in February. Market analysts had expected a softer decrease in TSF to CNY 1.12 trillion.

The slump in new credit was mainly due to a seasonal effect as banks tend to front-load loans at the start of the year. That said, economic disruptions related to the COVID-19 also played a role in the dismal performance observed in February. In fact, the reading in new loans already included CNY 300 billion in special-purpose loans intended to support small and medium-sized businesses.

Conversely, M2 growth gained steam in February due to easing liquidity conditions. In February, monetary authorities slashed the one-year loan prime rate, the seven-day reverse repo rate and the medium-term lending rate.

In a separate move, the People’s Bank of China (PBOC) cut the reserve requirement ratio (RRR) on 13 March, effective 16 March, by 0.5% to 1.0% percentage points. The RRR cuts are expected to release CNY 550 billion in liquidity to support the economy against disruptions caused by the COVID-19 outbreak. This time, the Bank also expanded the scope of financial institutions that can lend to small- and mid-sized companies under the PBOC’s finance program.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest