(Yicai Global) April 12 -- Lending expanded quicker than expected in China last month despite slowing growth in loans to households, signaling pressures on the real economy.

New yuan loans and fresh social financing, or the amount of money the financial system provided to firms and households, grew more than predicted in March, according to data provided by the central bank and analysts.

Citic Securities pointed out in a research report that it is the time for "loose credit." However, it is supported by corporate short-term loans, off-balance-sheet financing, and government bonds so the improvements may not be sustainable. The pressure on economic growth has increased due to recent Covid-19 outbreaks so it is still necessary to ease the monetary policy, it added.

Social financing widened by CNY4.65 trillion (USD730 billion) in March from a year earlier, which is CNY1.28 trillion more than it had risen in March 2021 or the biggest increase since August 2020, according to data revealed by the People’s Bank of China yesterday.

The contribution of new loans and government bonds is significant. New government bond financing tallied CNY705.2 billion, an addition of CNY392.1 billion year on year, as the financial sector continued to support social financing.

New yuan-denominated loans tallied CNY3.13 trillion (USD491.4 billion) last month, jumping by CNY395.1 billion (USD62 billion) from a year earlier, per the PBOC.

More specifically, the addition of loans to households was CNY753.9 billion, or CNY394 billion less than a year ago. Short-term loans increased by CNY384.8 billion, or CNY139.4 billion less than they did earlier, resulting in a fifth straight month of declines. Medium and long-term loans were boosted by CNY373.5 billion, a decrease of CNY250.4 billion from a year ago and a fourth consecutive month of contraction.

The short-term credit demand is insufficient as residents’ daily lives are restricted because of epidemic prevention and containment measures in core cities including Shenzhen and Shanghai, according to China International Capital.

Although real estate policies in some areas have been eased, the demand has not significantly been stimulated, noted the investment bank. Households' increase in medium and long-term loans is still at a low level, which might be caused by the lack of income growth and the relatively limited space for leverage, it added.

If households were widening their leverage slower, businesses stepped to the forefront. New corporate loans tallied CNY2.48 trillion in March, a CNY880 billion increase from a year earlier.

Companies' short-term loans and banker's acceptance financing have expanded quicker than before while medium and long-term credit growth is quite stable, said Wen Bin, chief researcher at China Minsheng Bank.

Editor: Emmi Laine, Xiao Yi