A bank staff member handles yuan transactions in Qionghai, south China’s Hainan province. Photo: PCP
China’s new yuan lending amounted to 2.81 trillion yuan ($418.89 billion) in June, beating previous market estimates, central bank data showed on Monday, as a series pro-growth measures have been deployed to anchor the economy to a rapid recovery.
The addition of yuan loans last month increased by 686.7 billion yuan from a year earlier. In the first half of the year, yuan lending added 13.68 trillion yuan, according to figures from the People’s Bank of China (PBC), the country’s central bank. The June number rose from new yuan loans of 1.89 trillion yuan in May.
At the end of June, broad money supply M2 increased by 11.4% year-on-year, accelerating by 0.3 percentage points compared to the end of last month or by 2.8 percentage points compared to the previous year.
Besides, the newly added total social financing for June rose to 5.17 trillion yuan from 2.79 trillion yuan in May, according to PBC data.
A China Merchants Securities research report earlier in July estimated new yuan lending in June at 2.5 trillion yuan. Total social financing was estimated at 4.5 trillion yuan last month, while M2 money supply growth hit 11.2 percent year-on-year.
Monday’s data points to a remarkably better-than-expected month for credit extension, as an imperative push for policy implementation following lackluster economic activity in April was shown to have effectively revived the economy.
The availability of a host of supportive policy measures obviously gives a boost to credit and social finance growth, Wang Yunjin, a senior fellow at the Zhixin Investment Research Institute, told the Global Times on Monday.
Market liquidity was relatively abundant in the second quarter, supporting renewals of small and medium-sized business loans and residential mortgages, Wang said.
The analyst also cited a new 1 trillion yuan national financing guarantee fund, an 800 billion yuan line of credit from political banks, among various options from the country’s political reserve that have been introduced to stabilize the economy.
Since late April, the government has unveiled far-reaching measures, including an effort to revitalize existing infrastructure assets and increase efficient infrastructure investment, and increased incentives designed to boost car purchases.
The continued roll-out of policies at central and local government level as well as a renewed call for effective policy implementation were seen as enabling a rapid economic rebound.
The economy showed an apparent recovery in activity in May. The upward trend consolidated in June. The official Manufacturing Purchasing Managers’ Index (PMI) released by the National Bureau of Statistics (NBS) rose from 49.6 in May to 50.2 in June, a sign of expansion.
The official manufacturing PMI had remained in contraction territory for three consecutive months.
While many regions have phased out strict anti-epidemic restrictions, consumption, especially in the auto sector, has improved, Wang said.
Residential credit in June returned to levels comparable to the same period last year, while lending to the corporate sector increased by 2.2 trillion yuan in the month, the analyst said, adding that medium and long-term loans had increased by 1,450 billion. yuan, perhaps supported by a rebound in investor confidence and the start of major infrastructure projects.
Going forward, the country’s credit extension is expected to continue to rise despite signs of rising consumer inflation.
The country’s consumer price index, a main gauge of inflation, edged up to 2.5 percent year on year in June from 2.1 percent in May, NBS data showed.
Total social finance credit growth is expected to rebound further in the coming months before moderating at the end of the year, UBS economists led by Wang Tao said in a note sent to the Global Times.
In addition to expectations for accelerated disbursement of previously announced tax refunds and increased targeted budget support for regions and industries hard hit by the Omicron outbreak, among other fiscal easing measures, economists predict that the PBC could continue to stimulate credit growth via reductions in reserve requirements and liquidity injection tools.
The PBC cut reserve requirements by 25 basis points from late April, aiming to free up about 530 billion yuan of long-term capital.