Medium-to-Long Term Credit Bounce in June Bodes Well for China’s Real Economy

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Medium-to-long term lending to enterprise as well as homebuyers saw a rebound in June, boding well for the health of China’s real economy and presaging stable monetary policy for the remainder of 2017.

Data from China’s central bank indicates that new RMB lending in June reached 1.54 trillion yuan, well ahead of the consensus market expectation of 1.2 trillion.

Medium-to-long term lending saw especially strong growth to both homebuyers and enterprises. Medium-to-long term personal loans rose by 483.3 billion yuan, while medium-to-long loans to companies increased 577.8 yuan, with trust loans rising 246.5 billion yuan.

Lending to enterprise clients bounced back to its third highest point since the start of 2017, indicating that demand in the real economy is recovering, as is consistent with the strong performance of PMI in June.

Liu Dongliang, senior analyst with China Merchant Bank’s asset management department, said to Caixin that June lending data surpassed expectations across the board, breaching new high historic high for the month.

Medium-to-long term retail lending hit its second highest point since the start of the year, indicating that real-estate control policies are having a limited impact on overall sales, as reflected by strong performance of markets in third and fourth-tier cities.

Given only modest declines in data for the real estate sector at present, quarterly investment is likely to exceed expectations despite ongoing moderation that could drag on Q3 or even first half performance.

Liu said that given the data for June evinces no marked cooling in the real economy and Q3 performance is likely to surpass expectations, the Chinese central bank will maintain stable and neutral monetary policy over the medium term, with little chance of relent in heavy regulatory pressure or China’s ongoing deleveraging campaign.

The People’s Bank of China will continue to focus on keeping market liquidity and the cost of funds stable, and will be mindful of the potential impact of any rises in rates upon the real economy.

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