On Wednesday, the Central Bank of the Communist Party of China announced that new RMB loans in April were RMB 1.47 trillion, compared to market expectations of RMB 1.6 trillion; the increase in social financing in April was RMB 1.85 trillion, compared to the previous survey median of RMB 2.25 trillion; the value was RMB 1.25 trillion less than the RMB 3.1 trillion in the same month last year, and even less than the RMB 3.34 trillion in March; broad money (M2) grew 8.1% year-on-year at the end of April, compared to the survey median of 9%. The median survey expectation was 9%.
The Wall Street Journal reported on May 12 that all three of these figures declined and were weaker than expected, both compared to March and to the same period last year, with M2 growth hitting a new low since July 2019; and credit and social finance both plunged by about 45% compared to March.
This follows new RMB loans of 2.73 trillion yuan in March and an increase in social financing of 3.34 trillion yuan, with M2 growth of 9.4% year-on-year at the end of March.
Compared with the same month last year, loans fell slightly in April this year, while social financing and M2 fell sharply. Last April, RMB loans increased by 1.7 trillion yuan, social financing increased by 3.09 trillion yuan, and M2 grew by 11.1%.
To counter the blow to the economy from the CCP virus epidemic, the CCP’s central bank implemented monetary easing policies, with RMB loans increasing by 2.85 trillion yuan in March 2020, social financing increasing by 5.15 trillion yuan, and M2 growing by 10.1% year-on-year at the end of the month, with social financing increasing by a record high and new loans surging by 2.15 times over the previous value, which is at a historically high level, and M2 hitting a March 2017 The new high.
As a traditional credit month, new RMB loans surged to 3.58 trillion yuan in January and social financing increased by 5.17 trillion yuan, a record high for the former and the second highest for the latter; M2 grew 9.4% year-on-year at the end of January.
Reuters reported on May 12 that Luo Yunong, a fixed income analyst at Industrial Securities, commented on April credit data, saying that the incremental scale of social financing fell more in April, with a relatively large contraction in on-balance-sheet credit, corporate debt financing and non-standard. In terms of credit, real estate regulation led to a certain fall in medium and long term loans to residents, and the fall in medium and long term loans to enterprises is a not-so-good signal, which means limited improvement in business expectations and little willingness to invest.
We have been expecting the RMB loan balance figure to slow to 11.5% by the middle of this year, and the latest data suggests that the fall could be even faster, to around 10.5% by December, said Mark Williams, an economist at Capitol Macro. If that happens, it will be a continued drag on the economy over the next few quarters.
Zhou Hao, senior economist at Commerzbank Asia, said the data appears to be lower than expected across the board, with social finance stock growth falling to 11.7% all of a sudden, and 12.3% last month, dropping quite a bit, which means the economy will slow down significantly next.