(Yicai Global) March 11 -- China’s social financing, a broad gauge of credit and liquidity in the economy, and new yuan loans outdid expectations last month as banks assured of ‘no sharp turns’ in monetary policy hiked lending to the real economy, according to analysts.

Outstanding social financing was CNY291.36 trillion (USD44.8 billion) in February, a 13.3 percent increase on the same month a year earlier and a 0.3 percentage point gain on January, data released by the People’s Bank of China showed yesterday. New yuan loans climbed by CNY452.9 billion.

Both data sets exceeded expectations, indicating that credit supply and demand are booming, according to analysts.

“The real economy’s demand for loans was strong in February,” said Wen Bin, chief researcher at China Minsheng Bank. “Banks in turn raised the provision of credit, showing that the country is putting more emphasis on serving the real economy.” 

Amid concerns that monetary policy would tighten this year, the government said earlier this month that it would continue supporting the economic recovery through no sudden change in policy.

One of the main reasons why credit growth topped predictions is because policies continue to support financing for manufacturers, said Wang Qing, chief macro analyst at Golden Credit Rating International. Medium and long-term loans to companies also rose significantly amid strong demand.

Faster Money Supply Growth

M2, a broad measure of money supply that covers cash in circulation and all deposits, also climbed to a more-than-anticipated CNY223.6 trillion, a 10.1 percent jump from a year ago and 0.7 point up on January.

Though higher than the previous month, the expansion of social financing and M2 in February “does not alter the general downward trend following the economic recovery in the second half of last year,” Wen said.

Growth in social financing and M2 will gradually get back into step with economic growth, Wen added. Monetary policy will increase support to manufacturing, inclusive finance, scientific and technological innovation as well as green development.

“Many micro, small and medium-sized companies haven’t fully recovered from the Covid-19 pandemic and still need monetary policy support,” said Li Qilin, chief economist at Hongta Securities Research Institute.

Still, monetary policy must prepare for future imported inflation and uncertainties over any moves by the US Federal Reserve, Wen said.

China’s Consumer Price Index, the country’s main inflation gauge, fell 0.2 percent last month from a year earlier, while the Producer Price Index, which measures costs for goods at the factory gate, jumped 1.7 percent, according to data released by the National Bureau of Statistics yesterday.

“The divergence between the CPI and PPI together with faster growth in global commodity prices has raised inflation expectations,” Wen said.

Editor: Kim Taylor