China extends more new loans than expected in January

China banks granted more new loans than expected in January, boosted by increased injections from the central bank ahead of the Lunar New Year.

Banks extended a record 2.51trn yuan of new loans in January, beating analysts’ estimates of 1.9trn yuan. The previous month banks granted 597.8bn yuan of new loans.

Increasing demand for mortgages supported the figures, as property prices recovered.

Analysts noted that lending tends to increase at the start of the year when banks are issue fresh loan quotas.

“Nonetheless, the pick-up was much larger than anticipated,” said Julian Evans-Pritchard, China economist at Capital Economics. “Stripping out the seasonal effects, growth in outstanding loans rose from 14.3% year-on-year in December to 15.3% year-on-year last month.”

Total social financing also rose to 3.42trn yuan in January from 1.82trn yuan in December.

Broad M2 money supply in January increased to a 19-month high of 14% in January from a year ago, exceeding expectations of 13.4% and December's 13.3%.

The expansion in credit growth was bolstered further cash injections into the banking system from the People’s Bank of China. The PBoC injected 1.53trn yuan via its standing lending, medium-term lending facility and pledged supplementary lending facility ahead of the Lunar New Year holidays in early February.

“Looking ahead, we expect credit growth to remain strong given that the PBoC has kept monetary conditions loose,” Evans-Pritchard said.

“Indeed, contrary to what many have claimed, there is no evidence that the PBoC’s intervention to prop up the renminbi has resulted in tighter domestic liquidity conditions.”