The latest official data indicates that new RMB loans hit an unprecedented high in January despite the Chinese government’s ongoing deleveraging campaign, while the shadow banking crackdown has led to a sharp contraction in off-balance sheet credit.
Data released by the Chinese central bank on 12 February indicates that China added 2.9 trillion yuan in RMB loans in January, for year-on-year growth of 867 billion yuan and a new record high.
While on-balance sheet lending remains robust, off-balance sheet forms of credit have cooled off considerably in the wake of Beijing’s shadow banking crackdown.
Official figures for social financing in January indicate that off-balance sheet financing accounted for only 4%, as compared to an on-balance share of over 90%, with the shadow banking crackdown compelling lenders to bring credit back onto their official reports.
While Chinese analysts had expected strong lending figures for January due to seasonal factors, the figure of 2.9 trillion yuan remains well ahead of consensus forecasts.
As a result of the lending increase RMB deposits increased by 3.86 trillion yuan in January, while the M2 balance posted year-on-year growth of 8.6% to reach 172.08 trillion yuan, for a modest acceleration of 0.5 percentage points.
China Minsheng Bank chief researcher Wen Bin (温彬) said that targeted reserve reductions for the purpose of improving financial inclusion have driven a rebound in M2 money supply growth.