REPEAT: MNI: China Credit Growth Shows Strong Funding Demand

Repeats Story Initially Transmitted at 12:43 GMT Feb 12/07:43 EST Feb 12

     BEIJING (MNI) - China recorded strong credit growth in January 2018,

suggesting funding demands remain extremely buoyant. A total CNY2.9 trillion of

new loans were extended in January, the highest level since the data was first

available in 2001. The total was higher than the CNY2.03 trillion recorded in

January last year and higher than the MNI market survey of CNY2.0 trillion.

     The data reflected the relatively strong funding demands after December,

when quotas restricted the issuances of new loans.

     The household sector showed a strong appetite for loans. The short-term and

long-term household sector grew CNY310.6 billion and CNY591 billion y/y

respectively, compared with increases of CNY122.9 billion and CNY620.3 billion

last January. The strong household sector loan growth should help support

property sales and investment in 2018.

     Short-term and long-term corporation loan issuances rose CNY375 billion and

CNY1.33 trillion respectively in January, lower than the growth of CNY433.1

billion and CNY1.52 trillion in January last year.

     Corporation loan growth has been inflated in part by the conversion of

non-standard asset to loans and therefore actual new loans to real economy will

bed weaker compared with same period last year.

     Both weaker funding demands and quota restrictions are behind the fall.

However, weaker note funding, which only grew CNY34.7 billion in January, tends

to suggest the funding demands have not weakened, so loan restrictions better

explain the overall decrease in credit to the real economy.

     --SHADOW BANKING CONTRACTS 

     Total social financing (TSF) grew CNY3.06 trillion in January, generally in

line with the MNI median forecast of CNY3 trillion and down from CNY3.7 trillion

in January 2017.

     The lower TSF in January was mainly on sharply contracting shadow banking

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

decreased CNY71.4 billion, rose CNY45.5 billion and CNY143.7 billion,

respectively, in January, compared with growth of CNY313.6 billion, CNY317.5

billion and CNY613 billion in January last year. That reflected the strict crack

down on shadow banking loans as a part of the financial risk prevention

campaign.

     Net financing of corporate bonds increased CNY119.4 billion in January,

compared with the decrease of CNY51 billion in January last year.

     --M2 REBOUND

     Money supply as measured by M2 rose 8.6% year on year to CNY172.08

trillion, beating the market expectations of an 8.2% gain and higher than the

8.2% growth in December. It was led by the increase of non-bank financial

institution deposits of CNY1.59 trillion in January.

     The PBOC also noted a change in its calculation of money supply, which

replaced the deposit of money market funds with money market funds held by

non-bank sectors. Without the change, M2 growth was 8.5% y/y in January.

     M0 money supply decreased 13.8% y/y in January, compared with the growth of

19.4% over the same period last year. This is largely due to the earlier Spring

Festival Holiday in 2017, which will likely have seen people hold more cash in

January last year than this year.

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

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