Economist at UOB Group Ho Woei Chen, CFA, assesses the latest credit figures in the Chinese economy.
Key Quotes
“New loans data came in strongly for January with aggregate social financing rising CNY5.17 trillion compared to CNY1.72 trillion in December and was also larger than the increase of CNY5.05 trillion a year earlier. Notably, new renminbi loans surged by a record CNY3.58 trillion during the month.”
“The increase in medium/ long-term loans to corporates and households were both larger compared to a year ago. Higher household loans growth will keep the PBoC vigilant over potential overheating risks in the real estate market.”
“New loans are typically high at the start of the year due to frontloading and seasonal demand but the moderation in loans growth (12.7% y/y in Jan from 12.8% in Nov and Dec 2020) and tapering of M2 growth (9.4% y/y in Jan from 10.1% in Dec 2020) towards pre-COVID levels are indications that the PBoC is looking at slowing credit expansion and paying more attention to the financial risks this year as the economy stabilizes.”
“With China’s debt-to-GDP ratio up 20% points to around 280% at the end of 2020 from 2019, the PBoC will be looking at stabilizing it this year. Nonetheless, given the uneven recovery, a policy U-turn is unlikely at this juncture despite the expected unwinding of some pandemic stimulus.”
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