China’s credit growth slowed further in April. New CNY lending moderated to CNY 707.9bn in April from CNY 1.18tn in March; aggregate financing increased by CNY 1.05tn during the month, following a CNY 1.182tn increase in March. Both figures werebelow market consensus and previous readings, reflecting still-weak economic activity and demand and banks’ cautious attitude towards adding risky assets. Lowerthan-expected credit growth in April suggests that monetary easing alone may not be sufficient to jump-start the economy.Newly extended medium- to long-term loans accounted for 61% of total new CNY loans, up from 45% in March, reflecting continued credit support for infrastructure investment and a shift in project lending to on-balance-sheet from off-balance-sheet.Corporates’ new short-term loans declined to CNY 70bn from CNY 307bn in March, while bill financing increased by CNY 136.1bn, up from just CNY 28bn in March. New medium- to long-term loans to households continued to decline in April, indicatingthat recent mortgage policy easing has yet to boost demand for mortgages.While growth in outstanding CNY credit remained steady at 14.1% y/y in April, growth in total social financing slowed to 12.3% y/y from 12.9% in March. Offbalance-sheet activity remained subdued in April due to strict regulation and weak demand, but the share of bond and equity financing in total social financing rose to 20% from 12% in March.M2 growth fell to a historical low of 10.1% y/y in April from 11.6% in March, possibly due to continued capital outflows and shrinking interbank and off-balance-sheet activity. Standard Chartered believes that the PBoC still aims to boost M2 growth to above 12% and that it will use a range of tools, including RRR cuts, to achieve this target.
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