* March new loans 1.18 trln yuan, vs f'cast 1.03 trln yuan
* March TSF 1.18 trln yuan, vs 1.35 trln yuan in Feb
* March M2 money supply +11.6 pct y/y, vs f'cast +12.3 pct
* Q1 new loans at 3.61 trln yuan, TSF at 4.61 trln yuan
* More policy steps expected to support growth
* FX reserves fall by $110 bln in Q1
By Kevin Yao
BEIJING, April 14 (Reuters) - Chinese banks made 1.18 trillion yuan ($189.87 billion) worth of new loans in March, beating expectations, as the authorities ramped up efforts to avert a slowdown in economic growth while lenders cut their exposure to the risky shadow financing.
Economists polled by Reuters had expected new local-currency loans at 1.03 trillion yuanin March, compared with 1.02 trillion yuan in February.
In spite of the expanded loans, growth in broad money supply slowed, which could put the central bank under more pressure to support the economy.
Broad M2 money supply (M2) in March rose 11.6 percent from a year ago, missing market expectations of 12.3 percent and slowing from February's 12.5 percent pace.
Outstanding loan growth was 14 percent in March. Analysts polled by Reuters had expected outstanding loans to grow by 14.5 percent, versus the previous month's 14.3 percent.
The People's Bank of China (PBOC) said that total social financing (TSF), a broader measure of overall liquidity in the economy, was 1.18 trillion yuan in March, versus 1.35 trillion yuan in February.
A KIND OF REFINANCING?
New bank loans totalled 3.61 trillion yuan in the first quarter, versus 3 trillion yuan in the same period last year, while TSF totalled 4.61 trillion yuan in the first three months, versus 5.6 trillion yuan a year earlier.
New loans in the first quarter made up for 78.3 percent of TSF, a rise of 24.1 percentage points from a year earlier.
"It seems like there's a refinancing under way from shadow banks to banks," said Tim Condon of ING.
"We get a large increase in loans but it doesn't translate into economic activity. It's just rolling over intermediary credit into the banking system. It's a healthy thing. We want to clean up shadow banks," he said.
Condon said the M2 growth data "is consistent with data that we are seeing across theeconomy, and that is that the all the activity indicators are slowing."
The central bank said after the data release that it will use a variety of policy tools to keep liquidity conditions appropriate and maintain "reasonable" growth in credit and social financing, and the borrowing costs for companies have declined.
The loan data came out one day after the government announced poor exports for March and one day before China announces its economic growth for 2015's first quarter. Economists expect GDP growth slowed to a six-year low of 7 percent.
FOREX RESERVES DROP
The central bank has cut interest rates twice since November, on top a cut in the amount of cash that bank hold as reserves in February, in a bid to keep liquidity conditions accommodative.
It has also guided short term money rates downward sharply in the interbank market, which finally began yielding results in April, with the benchmark seven-day bond repurchase agreement falling below 3 percent for the first time since Oct 2014.
The economy still faces persistent downward pressures due to a property market downturn, widespread factory overcapacity and elevated local debt levels, as global demand remains erratic.
China's foreign currency reserves - the world's largest - fell by $110 billion in the first quarter to $3.73 trillion, following a drop of about $50 billion in the previous quarter, amid signs of capital outflows.
Mark Williams, an economist at Capital Economics, estimated that the dollar's strength during the course of the first quarter may have shaved $130 billion off the dollar value of China's reserves, by reducing the value in dollars of reserves held in euro and yen.
"If that is correct, the PBOC was still a net purchaser of reserves in the first quarter, albeit on a much reduced scale," Williams said. (Editing by Richard Borsuk and Simon Cameron-Moore)
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