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Chinese Banks Loans Hit All-Time Monthly High

During January, local financial institutions in China issued a record number of loans to citizens.

Chinese Banks Loans Hit All-Time Monthly High

The mentioned result of the Asian country’s banking system in the first month of the current year is evidence that Beijing is making efforts to stabilize the growth of the world’s second-largest economy.

On Friday, February 9, the People’s Bank of China published data according to which last month the financial institutions of this state issued new loans for 4.92 trillion yuan ($684 billion). This figure is a record. In January 2023, Chinese banks issued loans for 4.9 trillion yuan. In December last year, this figure was fixed at 1.17 trillion yuan.

The result of Chinese banks’ lending activities in the first month of 2024 exceeded preliminary expectations, which, according to a survey by financial information provider Wind, was at the level of 4.67 trillion yuan.

The aggregated financing, which includes banks’ credits, bonds, and stock market funding, in the Asian country last month amounted to 6.5 trillion yuan. This figure is 506.1 billion yuan higher than the result for January 2022.

At the same time, the People’s Bank of China has attempted to suppress expectations about a change in monetary policy strategy towards easing. The financial regulator’s report on the implementation of the specified policy in the fourth quarter of 2023, published on Thursday, February 8, notes that less attention should be paid to high-frequency data, such as monthly bank credits. The People’s Bank of China stated monthly figures have obvious seasonal factors, remaining high in January and low in April, July, and October. In this case, the financial regulator refers to government agreements on construction projects that should provide a sustainable economic boost for the Asian country in early 2024.

The central bank has announced its intention to support lenders in meeting loan needs. The financial regulator strives for a reasonable growth in banks’ credits, and the overall stability of the corresponding dynamic and balanced expansion.

The head of the People’s Republic of China, Xi Jinping, called for support for the real sector of the economy. In response to this call, the financial authorities of the Asian country have increased support in areas such as technological innovation, green development, digital economy, and projects in the sphere of real estate, including the reconstruction of urban village reconstruction, emergency facilities, and affordable properties.

Beijing has not yet used large-scale measures to stimulate economic growth. The Chinese authorities are currently not considering such decisions due to factors such as an increase in the debt burden and a drop in the return on investment projects.

Beijing is implementing prudent monetary policy and remains committed to a targeted support strategy. The relevant priorities of the Chinese leadership were stated at the Central Economic Work Conference in December last year. Beijing is also seeking to improve coordination between various departments to support economic growth.

It is expected that the Chinese authorities will set a target for GDP growth for the current year at about 5%. If the appropriate decision is made, it will be characterized as ambitious, since the process of achieving the goal will be implemented in the area of impact of such circumstances as the diminishing base effect and a drop in confidence among consumers and investors. The GDP growth target will be announced in early March when a report on the work of Chinese Premier Li Qiang will be published.

At the end of January, the financial regulator of the Asian country made an unexpected decision to reduce the reserve requirement ratio for commercial banks by 50 basis points. Against this background, 1 trillion yuan worth of liquidity was injected into the market. Moreover, the decision of the financial regulator made it possible to reduce the re-lending rate by 25 basis points to provide support to small businesses and sectors of the economic system that are related to agriculture.

As we have reported earlier, China’s Services Activity Expands at Slow Pace.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.