MNI DATA ANALYSIS: China Credit Sees Steady Growth in February

--February New Loans Rise CNY839.3 Billion

     BEIJING (MNI) - China recorded steady credit growth in February, with

funding demands show no signs of falling despite slowing from levels seen a year

ago. A total CNY839.3 billion of new loans were issued in February, lower than

the CNY1.17 trillion recorded in February 2017 and lower than the MNI market

survey of CNY900 billion.

     The lower growth does not suggest funding demands have weakened, and partly

reflects the effect of Chinese New Year Holiday. Combining January and February,

minimizing the impact of the Spring Festival, new loans grew CNY3.74 trillion

this year, CNY540.7 billion higher than the same period last year.

     Lower new loan issuance in February was also caused by a sharp drop in

loans to financial institutions, which fell CNY179.5 billion, diving from the

CNY132.7 billion increase seen last February.

     New loans issued to real economy grew CNY1.02 trillion in February,

slightly below the CNY1.03 trillion growth last February, showing the credit

support and funding demands from the sector remain strong.

     In terms of loan structure, loans to households weakened. Short-term and

long-term household lending decreased CNY46.9 billion and increased CNY322

billion respectively, compared with decrease of CNY80.2 billion and increase of

CNY380.4 billion last February. Loan growth in the household sector will remain

closely watched, as regulators attempt to contain the household sector leverage

ratio. Lower credit growth in the household sector will put downward pressure on

investment growth in the property sector.

     Short-term and long-term corporate loan issuances rose CNY140.8 billion and

CNY658.5 billion respectively in February, both lower than the growth of

CNY338.6 billion and CNY601.8 billion seen in February last year.

     Medium- and long-term loans to households and corporations increased by

CNY980.5 billion in February from January. That is substantially more than the

CNY93.9 billion gain in short-term loans, with the faster long-term loan growth

indicating strong funding demands.

     --SHADOW BANKING SLOWS

     Total social financing (TSF) grew CNY1.17 trillion in February, above the

MNI median forecast of CNY1 trillion and slightly higher than CNY1.15 trillion

last February.

     Shadow banking sector loans grew at a slow pace, under pressure from

regulators. Entrusted Loans, trust loans and undiscounted bankers' acceptances

decreased CNY75 billion, increased CNY66 billion and CNY10.2 billion,

respectively, in February. That compared with respective growth of CNY117.2

billion, CNY106.2 billion and decrease of CNY171.8 billion in February last

year.

     Direct funding, including bond and stock issuance, increased CNY110.1

billion in February, compared with the decrease of CNY55.5 billion in the year

ago period. As companies the previously sought shadow banking financing must now

resort to more transparent channels, including selling bonds and shares, direct

funding levels will continue to hold up.

     --M2 REBOUND

     Money supply as measured by M2 rose 8.8% year on year to CNY172.91

trillion, above market expectations of an 8.7% gain and ahead of the 8.6% growth

in January.

     The higher M2 growth was largely caused by a higher-than-expected drop in

fiscal deposits, which fell CNY528.7 billion in February, compared with the

increase of CNY190.3 billion last February. 

     M0 money supply rose 13.5% y/y in February, rebounding from the 13.8% y/y

fall in January, with the volatility in the numbers caused by the Chinese New

Year holidays.

--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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