New Chinese bank lending nearly tripled in May as Beijing strengthens political support

Chinese banks extended 1.89 trillion yuan ($ 282.62 billion) in new yuan loans in May, nearly tripling their April total and significantly exceeding expectations, according to data released by the People’s Bank of China.

Analysts interviewed by Reuters had forecast new yuan lending to reach 1.3 trillion yuan in May, up from 645.4 billion yuan in April and 1.5 trillion yuan a year earlier.

Loans to households, including mortgages, rose to 288.8 billion yuan in May, after falling by 217 billion yuan in April, while business loans increased by 1.53 trillion yuan in May, from 578.4 billion yuan in April.

Chinese politicians have stepped up support for the economic slowdown as Shanghai and other cities ease containment measures for COVID-19 following a decline in new infections.

Last month, the cabinet announced a number of policy measures, including wider tax credit repayments and deferred payments of social security and business support loans.

Local media also reported last month that financial authorities had asked commercial banks to speed up lending.

In May, the central bank unexpectedly cut its benchmark mortgage rate, the second cut this year, in an effort to remedy the failing housing market, a key driver of economic growth.

But analysts say banks and potential borrowers remain cautious in case there are further outages from the virus.

After a handful of new cases have been uncovered, China’s Shanghai Mall will hold millions of people from massive COVID-19 tests this weekend – just 10 days after a grueling two-day month-long lockdown was lifted – which shocks residents and raises concerns about impact advertising.

MORE RELAXATION POLICY IN PROGRESS

Premier Li Keqiang has promised to achieve positive economic growth in the second quarter, although many private sector economists have predicted a contraction.

China will increase the credit quota of political banks by 800 billion yuan ($ 120 billion) so that they can support infrastructure construction, state broadcaster CCTV said, citing a cabinet meeting.

According to central bank data, the broad M2 coin rose 11.1% from the previous year, more than the 10.4% predicted by the Reuters poll. In April M2 increased by 10.5% compared to the previous year.

Outstanding yuan-denominated loans increased 11.0% in May over the previous year, compared with 10.9% growth in April. Analysts had forecast growth of 10.7%.

Growth in the stock of total social finance (TSF), a large measure of credit and liquidity in the economy, accelerated to 10.5% in May from 10.2% in April.

The FST includes forms of off-balance-sheet financing that exist outside the conventional bank lending system, such as initial public offerings, trust company loans and bond sales.

In May, the TSF jumped 2.79 trillion yuan from 910.2 billion yuan in April. Analysts interviewed by Reuters had expected a FAT of 2.02 trillion yuan in May.

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