Daily Management Review

Surge In New Loans In China For March As Virus Stimulus Is Implemented


Surge In New Loans In China For March As Virus Stimulus Is Implemented
Support for the coronavirus ravaged economy of China is being supported by the bank lending in the country with a total lending of 2.85 trillion yuan ($405 billion) in March while the total social financing also touching a record high with the central bank of the country injecting more liquidity into the system and reducing funding costs.
The impact of Covid-19, the disease caused by the novel coronavirus, on the second largest economy of the world has been such that it is now expected that the economy will see a quarterly contraction for the first time since the last 30 years and hence the Chinese policymakers are trying to prop up the economy.
According to the latest data from the People's Bank of China, the new yuan loans in March far exceeded analyst expectations as it rose significantly compared to the 905.7 billion yuan in February.
Analysts had expected that the new yuan loans come to be about 1.80 trillion yuan for the month of March after it fell more than expected in the previous month. And the new yuan loan for March was almost double of the amount noted in the same month a year ago.
A a record quarterly tally of 7.1 trillion yuan was hit by the total bank lending in the first three months of this year. The previous quarterly record was at 5.81 trillion yuan in the first quarter of 2019.
According to data from analysts calculated from the data from the Chinese central bank, compared to a net decline of 413.3 billion yuan in February, there was a sharp increase in March in household loans, mostly mortgages, in March at 989.1 billion yuan.
Additionally, compared to the 1.13 trillion yuan clocked in the previous month, corporate loans almost doubled to touch about 2.05 trillion yuan.
A slew of measures for the Chinese economy were announced by the Chinese central bank since early February ranging from cutting lending rates to making cheap loans accessible at subsidzsed rates and giving payment relief to companies that were the hardest hit from the containment measures undertaken by the Chinese government to prevent the spread of the novel coronavirus.
A reduction in the a banks' reserve requirement ratio (RRR) - the amount of cash small lending banks need to hold as reserves was announced by the Chinese central bank last Friday that resulted in freeing up as much as 400 billion yuan in liquidity for the Chinese economy.
According to reports, it is expected that the central bank will continue with its easing policies for providing support of the economy. However it is unlikely to follow the path taken by the United States Federal Reserve of deep rate cuts or quantitative easing because of concerns of debt and property risks.
Reports also said that it is likely the credit will be boosted and funding costs will be lowered by the central bank – particularly for small businesses as well as a account for enhanced fiscal spending by the government.