China Money January 2020


China: New yuan loans reach a record high in January, while M2 growth decelerates

February 20, 2020

In January, Chinese banks distributed CNY 3.34 trillion (USD 476 billion) in new yuan loans. This marked a record high and came in above the CNY 1.14 trillion recorded in December and the CNY 3.00 trillion that market analysts had expected. In the 12 months up to January, new yuan loans totaled CNY 16.9 trillion (12 months to December: CNY 16.8 trillion).

Meanwhile, annual growth in M2—the broadest measure of money supply in China—eased from December’s 8.7% to 8.4% in January. The print undershot the 8.6% 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—rose from CNY 2.10 trillion in December to CNY 5.07 trillion in January. Market analysts had expected a softer increase in TSF to CNY 4.3 trillion.

New yuan loans and the money supply are likely to continue growing at a strong pace in the months ahead. The one-year loan prime rate was cut by 10 basis points on 20 February, from 4.15% to 4.05%. This move follows earlier action by the Central Bank, which cut the seven-day reverse repo rate from 2.50% to 2.40% on 3 February and the medium-term lending rate from 3.25% to 3.15% on 17 February. These actions came on the heels of the outbreak of the coronavirus, which has brought the economy to a virtual standstill, and are hoped by authorities to boost activity.

FocusEconomics Consensus Forecast participants expect M2 to expand 8.4% in 2020, which is unchanged from last month’s forecast. In 2021, the panel sees M2 growth of 8.1%.

Author:, Economist

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China Money Chart

China Money January 20 20

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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