China's lending concerns: China's latest bank lending data for April has stirred concerns as it reveals a notable drop in new loans compared to the previous month, signalling a potential need for further economic support measures. The central bank disclosed that Chinese banks issued 730 billion yuan ($101 billion) in new yuan loans in April, a notable decline from the 3.09 trillion yuan recorded in March and falling short of analysts' forecasts.

This pullback in lending was largely anticipated due to the typical front-loading of loans by Chinese banks at the start of the year to attract high-quality customers and enhance market share. Despite expectations, the April figure was slightly higher than the 718.8 billion yuan recorded in April 2023.

Analysts attribute the slowdown in new loans, social financing, and M2 money supply to seasonal factors, a sluggish real estate market, and delayed government bond issuance. Zhou Maohua, an analyst at Everbright Bank, noted that the performance of new loans and bill financing indicates relatively weak demand for financing from the real economy.

The People's Bank of China, while not providing monthly breakdowns, has emphasised its commitment to maintaining reasonably ample liquidity and expanding credit to bolster the ongoing economic recovery, which still faces numerous challenges.

China's Q1 economic growth

China's economy surpassed expectations by growing at 5.3 per cent in the first quarter, offering some relief amid concerns over a property downturn and rising local government debt. However, March indicators suggested persistently fragile domestic demand, tempering overall momentum.

With a growth target of around 5 per cent set for 2024, achieving this goal may prove challenging given the subdued property market and tepid consumer demand.

In April, household loans, predominantly mortgages, contracted sharply, while corporate loans also saw a significant decline compared to March. Broad M2 money supply growth came in below expectations, and outstanding yuan loans recorded the lowest annual growth on record.

Moreover, the annual growth rate of outstanding total social financing (TSF), a comprehensive gauge of credit and liquidity in the economy, hit a record low in April. TSF experienced an unexpected contraction during the month, diverging from analysts' predictions of continued expansion.

Overall, China's April lending data underscores the ongoing challenges facing its economy, prompting concerns over the need for additional policy support to sustain growth momentum.

(With Reuters Inputs)