Chinese banks lend surprisingly more but M2 posts slower rise
Print Edition
CHINESE banks lent more than expected in March but money supply grew more slowly, indicating that measures are still needed to boost the economy.
Banks in China lent 1.18 trillion yuan (US$190 billion) in local currency loans last month, 66.1 billion less than the same month last year, the People’s Bank of China said in a statement yesterday.
But the lending still beat economists’ expectations for 1.03 trillion yuan according to a Reuters poll.
M2, a broad measure of money supply, rose 11.6 percent from a year ago, missing market expectations for a 12.3 percent rise. The growth was also short of February’s 12.5 percent gain and missed the official target of 12 percent.
Total social financing, the broadest measure of credit supply that includes loans, bank acceptance bills, corporate bonds and equity financing, reached 4.61 trillion yuan in the first three months, down 894.9 billion yuan year on year.
Liu Dongliang, senior analyst at China Merchants Bank, said the slower growth in M2 indicated that China’s economy still faced pressure while the weaker total social financing revealed sluggish demand from companies.
Economists said China still needed easing measures to boost liquidity and lower funding costs for companies.
“As China’s economy still faces downward pressures and the risk of deflation is rising, the easing bias of China’s monetary policy will likely be maintained,” ANZ said in a report yesterday.
The bank suggested China “will still need to inject liquidity permanently via reserve requirement ratio ... so that banks’ lending rates could be lowered further.”
The PBOC said the average lending rate for firms was 6.32 percent by the end of March, down 0.12 percentage points from the start of the year and down 0.54 percentage points from a year ago.
China reiterated it will use various tools to keep an appropriate level of liquidity and ensure bank lending and social financing grow reasonably.
The central bank revealed China’s foreign exchange reserves declined for the third straight quarter to US$3.73 trillion at the end of March from US$3.84 trillion three months earlier.
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