WORLD ECONOMY

 

China's new bank lending and total social financing weakened in April, but money supply growth edged up slightly, official data showed on Monday, mirroring banks' rising awareness of default risks and the authorities' cautious efforts to support the slackening economy.

Chinese banks' new lending in April amounted to 774.7 billion yuan ($125.8 billion), lower than the 1.05 trillion yuan in March, the People's Bank of China (PBC), the central bank, said in a statement posted on its website.

The PBC said China's total social financing - a broad measure of liquidity in the economy, including bank credit and bonds as well as inter-company and trust loans - amounted to 1.55 trillion yuan in April, a decline from 2.07 trillion yuan in March.

Broad M2 money supply, covering savings deposits and money market funds, grew 13.2 percent last month compared with a year earlier, 1.1 percentage points higher than the growth in March, according to the PBC.

"New lending slid as a result of sluggish corporate performance amid the cooling economy," Liu Xiao, a senior analyst at Beijing-based Anbound Consulting, told the Global Times on Monday.

There is expected to be a sharp rise in bad debts this year, Liu said.

 

China's property market, which used to be one of the country's major growth drivers, has started to show signs of weakening, especially in smaller cities, leading to an increase in potential default risks.

 

 

 

About one-third of the country's credit flows directly or indirectly to the property sector, either through bank lending or off-balance-sheet shadow banking activities, Xu Bin, research director at Beijing-based Qilin Venture, told the Global Times on Sunday.

 

The five top State-owned banks posted new combined non-performing loans (NPLs) of 25.65 billion yuan in the first quarter of this year, accounting for more than half of the aggregated 46.83 billion yuan-worth of NPLs they recorded for the whole of 2013.

 

The slide in social financing is mainly due to tightened regulations for shadow banking activities such as inter-company and trust loans, Liu said.

Credit offered by China's shadow banking sector hit 5.17 trillion yuan by the end of 2013, a rapid rise from 3 trillion yuan at the end of 2012, Wu Xiaoling, former deputy governor of the PBC, said at a forum in Beijing on Sunday.

The central bank's cautious injection of liquidity through open market operations led to the slight increase in M2, which aimed to offset hot money inflows in order to maintain a stable exchange rate, Liu said.

 

The slowdown of new lending is in line with current policy, as the country is aiming to trim overcapacity and restructure its economy, Li Wei, China economist at Standard Chartered Bank, told the Global Times on Monday.

Despite increasing default risks in the banking sector, there is no systemic financial risk, Li said.

Another reason for the rise in M2 was the low base of comparison from April last year, and it has returned to a normal level of growth, he said.

Li said a moderate easing monetary policy such as a cut in the reserve requirement ratio (RRR) for commercial banks would help steady the economy, and there might be clearer policy directions in the second quarter.

 

Zhou Xiaochuan, governor of the central bank, said on Saturday at a closed-door session at Tsinghua University that China will not use large stimulus measures to spur the economy, in response to market speculation that the PBC was preparing to cut the RRR.

China's GDP increased by 7.4 percent in the first quarter, the lowest pace in 18 months. This was better than market expectations, but 0.1 percentage points lower than the official target for the year.

                                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                     (Global Times 2016-08-11

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