China's March credit data falls short of expectations

China's credit data for March has disappointed analysts, signalling a need for additional stimulus measures from the central bank to support economic growth, especially as the country aims to achieve ambitious growth targets.

New bank lending in China rose less than expected in March compared to the previous month, with broad credit growth hitting a record low. Chinese banks extended 3.09 trillion yuan ($426.95 billion) in new yuan loans in March, up from 1.45 trillion yuan in February but falling short of analyst expectations. Analysts had predicted new yuan loans to reach 3.56 trillion yuan in March.

The disappointing credit data follows underwhelming trade numbers released earlier in the day, indicating a slowdown in both exports and imports. This raises concerns about the strength of the Chinese economy's recovery.

According to Capital Economics, the deceleration in bank loan and broad credit growth suggests a need for further policy intervention. While the People's Bank of China (PBOC) is expected to implement policy rate cuts, weak demand for credit in the private sector may limit the impact of such measures.

In the first quarter, new loans totalled 9.46 trillion yuan, although the PBOC did not provide figures for March alone. The slowdown in credit growth could be attributed to the central bank's efforts to prevent excessive lending by banks in early 2024, leaving room for expansion in the coming months.

Analysts anticipate more policy easing from the central bank, including possible reserve requirement ratio cuts and interest rate adjustments. Despite the need for stimulus, there are concerns about maintaining an appropriate balance to avoid excessively loose monetary policy.

The broad M2 money supply grew 8.3 per cent from a year earlier, below estimates, while outstanding yuan loans grew 9.6 per cent in March, the lowest on record. Annual growth of outstanding total social financing (TSF), a measure of credit and liquidity, also slowed to its lowest level on record.

(With Reuters inputs)