DEUTSCHE BANK: Chinese lending exploded

  • New Chinese loans increased by RMB 2 trillion in January.
  • The People’s Bank of China may be tempted to raise benchmark rates to slow lending, according to Deutsche Bank.

Domestic lending in China shot up in January in a sign the country’s credit boom is still accelerating.

According to a report by Deutsche Bank, loans denominated in renminbi went up by RMB 2 trillion ($US297 billion) in January.

While that is a smaller jump than the record RMB 2.5 trillion increase in January 2016, “it is still a very fast expansion by historical standards,” Deutsche Bank analysts Zhiwei Zhang and Li Zeng said in a note to clients.

The increase in total financing “set a new monthly record at RMB 3.74 trillion, breaking the previous high of RMB 3.48 trillion in Jan 2016,” they said.

Here is the lending chart:

And here is the financing chart:

The data suggests that the People’s Bank of China will have to do more to slow lending, especially in the shadow banking sector. 

Here is what Deutsche Bank says (emphasis ours):

“It has been trying to tighten credit growth since October, but was cautious not to impose harsh measures, in order to avoid a disruptive deleveraging.”

“We expect it to repeat ‘mini hikes’ on lending facility and reverse repo rates several times, and potentially impose loan quotas to contain credit growth, which would be consistent with the government’s goal to keep monetary policy ‘prudent.'”

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