Plunge in China bank loans adds to fears over recovery

Agencies and staff reporter

China's new bank loans tumbled far more sharply than expected in April from the previous month, adding to concerns about the economy's recovery, while regulators asked banks to cap rates offered on some deposits from next week.

Financial institutions offered 718.8 billion yuan (HK$812.1 billion) worth of new loans in the month, far below economists' forecasts of 1.4 trillion yuan, the People's Bank of China said yesterday. That compared to 3.89 trillion yuan in March, though it was higher than 645.4 billion yuan a year earlier when the economy was rocked by Covid lockdowns.

Aggregate financing, a broad measure of credit, reached 1.22 trillion yuan, also much lower than the median estimate of 2 trillion yuan.

April is traditionally a slow month for credit expansion following a surge in lending by banks at the year's start.

The PBOC has refrained from providing further stimulus after cutting banks' reserve requirement ratio in March and guiding banks to lend more in the first quarter to spur growth.

This came after a notice showed that the country's biggest state-owned banks were permitted to lower the rates on so-called agreement and call deposits from next Monday. The move will help drive down their costs, giving them scope to lower loan rates and helping to fuel lending in the economy.

Guotai Junan said the overall impact is likely to be limited as most lenders' current rate offerings remain below the new caps.

Separately, Pictet forecast China's economic growth to slow to 4 percent per year on average in the coming decade due to the aging population, deglobalization, and US curbs on high tech.