MNI DATA ANALYSIS: China Credit Growth Robust in April

--April M2 rose 8.3%, New Loans CNY1.18 trln; TSF grew CNY1.56 trln

     BEIJING (MNI) - China credit growth remained steady in April, while the

continued negative spread between M1 growth and M2 growth remains a concern.

     --LOAN DEMAND STEADY

     A total CNY1.18 trillion of new loans were issued in April, higher than the

CNY1.1 trillion recorded in April 2017, and also above the MNI market survey

median of CNY1.15 trillion, suggesting the demand for loans remains largely

stable and some banks are converting their non-standard assets into loans, in

line with regulator directions.

     Short-term and long-term household lending increased CNY174.1 billion and

CNY354.3 billion respectively, compared with increase of CNY126.9 billion and

CNY444.1 billion last April. The scale of the slowdown is not large enough to

hint at significant mortgage slowing.

     Short-term and long-term corporate loan issuance rose CNY73.7 billion and

466.8 billion respectively in April, both lower than the respective CNY155.4

billion and 522.6 billion seen in April last year.

     Note financing rose CNY2.3 billion in April, beating the decrease of

CNY198.3 billion seen last April. Combining note financing and loans to the

corporate sector, financing to the real economy via loans was CNY63.1 billion

higher in April, compared with same period last year.

     --SHADOW BANKING CONTRACTS

     Total social financing (TSF) grew CNY1.56 trillion in April, above the MNI

median forecast of CNY1.3 trillion and also higher than CNY1.39 trillion last

April.

     Shadow banking sector loans contracted this month, under pressure from

regulators. Entrusted Loans and trust loans decreased CNY148.1 billion and

CNY9.4 billion, respectively, in April. That compared with a respective decrease

of CNY4.8 billion, and increase of CNY147.3 billion in April 2017.

     Undiscounted bankers' acceptances recorded a surprising gain for CNY154.4

billion in April, higher than CNY34.5 in April 2017. This most likely reflects

companies' strong funding demand because discounting bankers' acceptances will

take up banks' quota.

     Direct funding, including bond and stock issuance, increased CNY377.6

billion and CNY53.3 billion respectively in April, compared with the growth of

CNY50.1 billion and CNY76.9 billion in the year ago period.

     --M1-M2 NEGATIVE SPREAD

     Money supply as measured by M2, rose 8.3% year-on-year to CNY173.77

trillion, below market expectations of an 8.5% gain while higher than the 8.2%

growth in March. M1 growth picked up slightly in March at 7.2% y/y compared with

7.1% in March and 18.5% in April last year.

     This is the third consecutive month that M1 has grown slower than M2, a

possible warning sign that companies have transferred funds from checking

accounts to savings accounts. Weaker growth in M1 partly reflects relatively

weak property sales. Moving forward, this may signal companies' have less

intention to invest or expand production (for which they would need more working

capital in checking accounts).

     Another possibility is companies have been putting more working capital

into highly-liquid money market funds, which is included in M2 calculation,

causing the M1/M2 spread to widen. However, if this is the case, the negative

spread between M1 growth and M2 growth cannot be taken as a sign suggesting

weaker investment intentions.

--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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