(Yicai Global) May 12 -- The amount of credit issued in China last month fell sharply from the month before, after strong growth in the first quarter, and household loans contracted for only the fifth time since records began, indicating low confidence among individuals, according to the latest data.

New yuan loans plunged 80 percent in April from March to CNY718.8 billion (USD103.4 billion), but climbed 10 percent year on year, according to figures released by the People’s Bank of China yesterday.

April has always been an off-season for borrowing and after the extraordinary amount that was lent out in the first quarter at CNY10.6 trillion (USD1.5 trillion), the slowdown in April is in line with expectations, Dong Ximiao, chief researcher at MUCFC, told Yicai Global.

Household loans, which refer to mortgages and other forms of credit extended to individuals, slumped by CNY241.1 billion (USD34.7 billion). This is only the fifth time that personal loans have dropped since statistics began, with the previous months being February 2019, February 2020, February 2022 and April 2022.

The fall in household loans is mainly due to fewer real estate purchases, after an upswing in March, showing that sluggish demand and weak confidence persists, Dong said. The government should continue to make it easier for home buyers to get credit, such as by reducing downpayments and borrowing rates.

But the corporate sector remained upbeat, with business loans increasing by CNY683.9 billion (USD98.5 billion) last month, and loans to non-banking financial institutions expanding by CNY213.4 billion, the central bank said.

Chinese people are less willing to save and yuan deposits tumbled CNY460.9 billion (USD6.6 billion) in April. This might be because people are spending more as demand recovers or because the interest rate on savings is sliding, said Ming Ming, chief economist at CITIC Securities. The stock market also picked up in April, attracting more funds, he added.

M2 broad money expanded 12.4 percent in April from the year before to CNY280.9 trillion (USD40.4 trillion), a slowdown of 0.3 percentage point from the month before, the PBOC said yesterday.

And the consumer price index, a gauge of inflation, edged up 0.1 percent in April from a year ago, the lowest rate in 26 months, according to data released by the National Bureau of Statistics the same day.

At present, there is no inflationary pressure in China, Dong said. From the perspective of monetary policy, the PBOC can trim the reserve requirement ratio and interest rates when appropriate to improve market liquidity.

Editor: Kim Taylor