Chinese banks' new loans hit record high at $477b in January

Regulators have encouraged banks to lend more to firms hit by the deleveraging.

Reuters reported that new loans extended by Chinese banks rose 11.38% to a record-high $477b (RMB3.23t) in January from $428b (RMB2.9t) a year ago as banks stepped up lending activities to credit-short firms in response to heightened regulatory pressure.

Corporate loans jumped to $380b (RMB2.58t) from $69.86b (RMB473.3b) in December, whilst household loans rose to 1$46.09b (RMB989.8b) from $66.48b (RMB450.4b) according to Reuters calculations based on the PBOC data.

In December, corporate loans accounted for 80% of new loans in January, up sharply from 44%. Moreover, the volume of new loans extended by Chinese banks hit a record $2.4t in the same month amidst the regulator's active encouragement for banks to make funds available.

Also read: Chinese bank loan growth to hit 13.8% in 2019

“Whilst we wouldn’t pin too much on a single month’s data, the latest pick-up in credit could be a sign that credit growth is starting to bottom out in response to monetary policy easing,” Julian Evans-Pritchard, senior China economist at Capital Economics, said. “A recovery in lending, if sustained in coming months, would be consistent with our expectation for growth to stabilize in the second half of this year,” he added, noting it usually took six to nine months before new loans translated into business activity.

Also read: Chinese banks brace as more reserve cuts loom to boost credit-short SMEs

Analysts believe that another 150 bps reserve requirement ratio cut will be implemented in 2019 to unlock more funds for lending even as the central bank already but the RRR in January by 100 bps.

Here's more from Reuters:

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