China credit growth slows slightly in April

By Alexander Bueso

Date: Friday 12 May 2017

China credit growth slows slightly in April

(ShareCast News) - Chinese credit growth slowed in April but some economists said the resulting cooling effect on the economy should only be moderate.
Banks in Asia's largest economy extended 1,100bn yuan-worth of new loans last month, pushing the year-on-year rate of growth in outstanding bank loans from 12.4% year-on-year to 12.9%.

In March, new yuan loans ran at 1,020bn yuan.

Company loans saw the biggest pick-up, as higher bond yields drove them towards bank borrowing and away from debt issuance.

Lending to households on the other hand remained flat.

Growth in Total Social Financing, a broader measure of credit preferred by the country's central bank, also accelerated, with the pace of growth rising from 12.5% year-on-year to 12.8%.

However, government bond issuance, which is excluded from the People's Bank of China's TSF measure, slowed sharply too.

That meant that at the broadest level credit growth in fact slowed, Julian Evans Pritchard at Capital Economics said, with their proprietary measure which combines both showing that the pace expansion slowed from a 15.0% year-on-year clip to 14.9%.

"This will feed through into weaker economic growth in the coming quarters but the slowdown should be gradual, in large part because credit growth has so far only seen a moderate deceleration despite recent policy tightening," he said.

Pritchard also noted indications from the data that government property purchase restrictions may finally be having an effect.

On the other hand, growth in so-called 'shadow credit' included in the TSF measure revealed a recent acceleration, despite Beijing's crackdown on lending by non-bank financial institutions.

On a more cautious note, commenting on credit growth during the first quarter Zhiwei Zhang at Deutsche Bank on Thursday said that overall it had only moderated slightly. Hence, he did not expect growth in the Asian giant to collapse in 2017.

However, he was more concerned about the outlook in 2018 as CPI might move above 3% at some point, with further rate hikes by the US Fed constraining the PBOC's room for manouvre even more.

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