China banks lend record 10tn yuan in Q1

Agencies and staff reporter

China's new bank loans hit an all-time high of 10.6 trillion yuan (HK$12.08 trillion) in the first quarter of 2023 but inflation remained under control.

Banks extended 3.89 trillion yuan in new yuan loans last month, more than double February's tally and surpassing analysts' expectations, data from the People's Bank of China showed yesterday.

And new loans for the first quarter totalled 10.6 trillion yuan up 27 percent from the first quarter of 2022, the previous record.

This came as the world's second-largest economy rebounded from pandemic disruptions driven by consumption and infrastructure. To spur credit growth, the PBOC in March cut banks' reserve requirement ratio for the first time this year.

Household loans, mostly mortgages, jumped to 1.24 trillion yuan in March from 208.1 billion yuan in February, while corporate loans rose to 2.7 trillion yuan last month from 1.61 trillion yuan in February.

Several small and mid-sized banks in China have lowered their deposit rates, a move that could help ease costs as loan growth faces more pressure amid rising economic risks.

The PBOC said the recent cuts in deposit rates by some banks was normal under a market-oriented mechanism for deposit rates set up in April last year.

Broad M2 money supply grew 12.7 percent in March from a year earlier, data showed, in line with estimates of 12.7 percent in the Reuters poll.

PBOC party secretary and deputy governor Guo Shuqing said the mainland authorities will strengthen the system for financial stability and prevent external risk spillover in advance.

Meanwhile, China's consumer price index inched up 0.7 percent in March, slowing for two consecutive months and the lowest growth in one and a half years.

The producer price index fell 2.5 percent year-on-year, the fastest pace since June 2020 and compared with a 1.4 percent drop in February. The PPI has fallen for six straight months.

Natixis economist for Asia-Pacific Gary Ng said the weak demand still looms over China's economic recovery and sees the possibility of further rate cuts if the second-quarter economic data miss expectations.