Economist at UOB Group Ho Woei Chen, CFA, assesses the latest credit figures in the Chinese economy.
Key Quotes
“New renminbi loans were higher than expected at CNY2.73 tn in March (Bloomberg est: CNY2.30 tn; Feb: CNY1.36 tn), bringing cumulative increase to a fresh record high of CNY7.67 tn in 1Q21, surpassing the previous record in 1Q20 (CNY7.10 tn). The record loans extended suggests that China’s 1Q21 GDP growth due this Friday (16 Apr), could continue to perform strongly (Bloomberg est: 18.5% y/y; UOB est: 13.5%; 4Q20: 6.5%).”
“The larger-than-expected increase in March was due to strong gains in overall household loans and medium/long-term loans to the corporates. Longer-term loans to households are associated with property investments, the increase of which means that policymakers will continue to watch this space with growing risk that the benchmark interest rate could increase sooner than expected.”
“Credit growth has remained strong at 12.6% y/y in March despite moderating from 12.9% y/y in February. The M2 growth also slipped back to 9.4% y/y in March (Bloomberg est: 9.5% y/y; Feb: 10.1% y/y) which was similar to the pace in January.”
“With the robust loans growth, the People’s Bank of China (PBOC) had reportedly asked the financial institutions to keep the increase in new loans this year to the same level in 2020. Although this would maintain new loans at a record high of CNY19.63 trillion, the implied loans growth rate would slow sharply to 11.2% in 2021 from 12.8% in 2020, the slowest pace since 2005. Given that banks have already booked a strong loans growth in 1Q21, this would imply a sharper slowdown in new loans for the rest of the year.”
“Nonetheless, this remains consistent with PBOC’s target for loans growth to be in line with nominal GDP growth given our 2021 real GDP growth and CPI inflation forecasts of 8.5% and 2.6% respectively. Despite rising debt concern and an expected slowdown in credit expansion this year, we maintain our forecast for both the 1Y LPR and the 5Y & above LPR to be kept unchanged for the rest of 2021 at 3.85% and 4.65% respectively.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0600 as focus shifts to Powell speech
EUR/USD fluctuates in a narrow range above 1.0600 on Tuesday as the better-than-expected Economic Sentiment data from Germany helps the Euro hold its ground. Fed Chairman Powell will speak on the policy outlook later in the day.
GBP/USD stays below 1.2450 after UK employment data
GBP/USD trades marginally lower on the day below 1.2450 in the early European session on Tuesday. The data from the UK showed that the ILO Unemployment Rate in February rose to 4.2% from 4%, weighing on Pound Sterling.
Gold price remains depressed near $2,370 amid bullish USD, lacks follow-through selling
Gold price (XAU/USD) attracts some sellers during the early part of the European session on Tuesday and reverses a major part of the overnight recovery gains from the $2,325-2,324 area, or a multi-day low.
XRP struggles below $0.50 resistance as SEC vs. Ripple lawsuit likely to enter final pretrial conference
XRP is struggling with resistance at $0.50 as Ripple and the US Securities and Exchange Commission (SEC) are gearing up for the final pretrial conference on Tuesday at a New York court.
Canada CPI Preview: Inflation expected to accelerate in March, snapping two-month downtrend
The Canadian Consumer Price Index is seen gathering some upside traction in March. The BoC deems risks to the inflation outlook to be balanced. The Canadian Dollar navigates five-month lows against the US Dollar.