More China policy easing seen as lending slows

BEIJING: Chinese banks throttled back new lending in April after a record first quarter that sparked fears of more bad loans, but analysts say the central bank will likely have to step up support for the economy as trade tensions with the United States escalate.
Global investors are closely watching to see how much more support Beijing will inject to shore up growth. But those policy expectations are swinging wildly as a sudden blowup in diplomatic ties threatens China’s nascent recovery. US President Donald Trump stunned financial markets this week by announcing he will hike tariffs on Chinese goods on Friday unless Beijing agrees to a trade deal, sharply escalating their dispute after months of negotiations. Beijing has vowed to retaliate.
The resurgence in external risks comes as China’s economy was beginning to show tentative signs of stabilizing after a raft of growth-boosting measures.
More modest bank lending last month suggested the central bank was fine-tuning policy in light of recent encouraging data and concerns about a rapid rise in debt, economists at Nomura said in a note.
But they added: “We expect a rebound of money and credit in May.
“The sudden escalation of US-China trade tensions and the recent sharp drop of stock prices could convince Beijing to take further easing measures to bolster confidence and stabilize growth.”
Chinese banks extended 1.02 trillion yuan ($150.16 billion) in net new yuan loans in April, the central bank said on Thursday, well below analysts’ expectations of 1.2 trillion yuan in a Reuters poll and March’s surprisingly strong 1.69 trillion yuan.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.4 per cent from a year earlier from 10.7 per cent in March. TSF growth is a rough gauge of credit conditions.
“The slowdown in credit growth underlines the need for further monetary policy easing in order to keep credit expanding fast enough to provide a floor to economic growth,” Julian Evans-Pritchard at Capital Economics said in a note.
The credit data was released unexpectedly early, hours ahead of the resumption of last-ditch US-China trade talks and a day ahead of the threatened US tariff hike. The data is typically released between the 10th and 15th of every month.
While April lending levels have tended to moderate from March in past years, investors had been looking to details of the data for clues on how much more policy easing to expect.
The People’s Bank of China (PBOC) said on Monday it will cut reserve requirement ratios (RRR) for some small and medium-sized banks, in the latest in a series of moves specially tailored to help small firms struggling amid the economic slowdown.
Other data on Thursday showed price pressures in China were rising, with April consumer inflation quickening to a six-month high of 2.5 per cent. — Reuters