MNI 5 Things: Expect Solid China Loan Growth In April

--5 Things To Look For In China Money Supply & Credit Data

     BEIJING (MNI) - China's April money supply and credit data will be released

at some point over the next few days. The median forecast among analysts in an

MNI survey calls for an 8.5% y/y growth of M2, a CNY1.15 trillion gain in new

loans, and a CNY 1.3 trillion gain in total social financing.

     Ahead of the release, we outline five themes warranting particular

attention.

     --ROBUST CREDIT GROWTH

     MNI's survey shows analysts largely see credit growth likely to be strong

in April. Last April, new loans grew CNY1.1 trillion, while total social

financing grew CNY1.39 trillion. Funding demands remained strong last month, and

considering the impact of converting non-standard assets to loans, the survey's

result seems reasonable and it is very likely April's loan growth to be higher

than a year ago.

     --REBOUND IN M2 GROWTH

     Market participants expect M2 growth to rebound to 8.5% in April, after a

somehow surprising dip to 8.2% in March. MNI expects M2 to rebound slightly in

April, as loans growth remained steady, even as shadow banking continued to

contract.

     --SHADOW BANKING GROWTH TO REMAIN SLOW/NEGATIVE

     MNI believes the shadow banking growth, including trust loans, entrusted

loans and undiscounted bankers' acceptances, to be flat or modestly lower, due

to the continued crackdown by regulators. In March, shadow banking decreased

CNY252.5 billion. The question is how fast the contraction was in April.

     --MORE DIRECT FUNDING

     Bond issuances remained strong in April, boosted by favourable bond yields

for issuers. The net issuances of corporate bonds in April was roughly CNY400

billion higher than in March. Therefore, the net financing of bonds published by

the PBOC will also likely be higher than the CNY334.4 billion in March.

     --M1-M2 SPREAD TO WIDEN FURTHER?

     Another number that needs attention is the spread between M1 growth and M2

growth, which turned negative in February before widening to -1.1% in March,

with M1 growth lower than M2 growth. Property sales data published daily from 30

cities suggested  sales increased to 12.24 million square metres in April, up

from 12.1 million square metres in March, while in 2017 April figure was lower

than March. Increased property sales will boost checking account deposits for

property developers, supporting M1 growth. If M1 growth continued to slow in

this case, it will mean companies are quite pessimistic about the investment

outlook, therefore holding less working capital.  

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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