(Bloomberg) -- China’s bank lending and credit provision hit records in March, indicating that government efforts to boost support for the economy may be having an effect.

  • Aggregate financing increased by 5.15 trillion yuan ($732 billion) last month, compared to a median estimate of 3.14 trillion yuan. That was a record for any month in comparable data back to 2017.
  • Financial institutions offered 2.85 trillion yuan ($405 billion) of new loans in the month, versus a projected 1.8 trillion yuan. That was the highest figure for March since data began in 1992.

Key Insights

  • Broad M2 money supply grew 10.1% from a year earlier, the fastest rise in three years.
  • China’s industry largely resumed production in March, although restarts in the services sector have been slower. The gradual recovery in the economy, combined with additional cheap funding and interest rate cuts by the PBOC, likely contributed to the expansion in credit.
  • “The 5 trillion yuan rise in total social financing was a real surprise, supported by the bullish credit bond issuance,” according to Xing Zhaopeng, an economist at Australia and New Zealand Banking Group in Shanghai. “Looking forward, the PBOC will continue to stay in an easing mode at the cost of higher debt-to-GDP ratio.”
  • The rise in March was also likely boosted by a large amount of government bonds that were actually sold in February, according to a report from China International Capital Corp. Those sales missed the deadline for inclusion in the February data.

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  • The PBOC’s interest rate cut on 7-day repurchase agreements in late March is “an important shift from targeted, mild relief in Q1 to more broad-based demand stimulus in Q2,” Jian Chang, chief China economist at Barclays Plc. wrote in a report before the data was released.
  • “Looking forward, we believe monetary policy will prioritize growth, with the focus on lowering financing costs and stabilizing credit growth,” she said.
  • “China is set to deliver a large stimulus package soon to combat the worst recession in decades, with most of the financing expected to be provided by the PBOC,” Lu Ting, chief China economist at Nomura International HK Ltd, wrote in a report before the release.

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