New loans extended by Chinese banks posted their first decline since 2011 last year, underscoring weak demand for financing in the economy plagued by lingering deflation and a housing slump.
- Financial institutions offered 18.09 trillion yuan ($3.38 trillion) of new loans in 2024, according to data released by the People’s Bank of China on Tuesday, exceeding the median forecast of economists surveyed by Bloomberg. The total was lower than the previous year’s volume of 22.75 trillion yuan, representing the first annual drop in 13 years.
- Aggregate financing, a broad measure of credit, rose 32.26 trillion yuan, less than the 35.59 trillion yuan recorded in 2023, PBOC figures showed. The median forecast was 31.56 trillion yuan.
Subdued borrowing demand from the household and corporate sectors drove the declines in credit numbers in 2024. While China’s economic momentum improved in recent months on the back of Beijing’s stimulus blitz, its growth prospects this year remain far from upbeat, hobbled by persistent deflation and with a trade war looming with the US.
In a sign of still battered confidence in the real estate market, medium- to long-term news loans to households — a key gauge of mortgage lending activity — were just 2.25 trillion yuan in 2024, the lowest since 2014.
Short-term new loans to residents, usually used for purposes such as shopping and investment in small businesses, came in at 473 billion yuan, slightly more than a quarter of the previous year’s total and the worst reading since 2008.
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Medium- to long-term new loans to companies reached 10.1 trillion yuan last year, compared with 13.6 trillion yuan in 2023. That’s the first slowdown in the annual pace of new credit issuance since 2018, reflecting a reluctance by businesses to invest.
What Bloomberg Economics says...
“China’s better-than-expected December credit data masks the fact that non-government financing remained weak. It suggests the recovery is losing steam in the third month after the policy stance turned more supportive. Clearly, the economy needs more help.”— David Qu, economist.
Policymakers will need to roll out more assertive policies to help domestic demand recover and absorb any blow to export growth from the expected US tariff hikes. The government has ramped up bond issuance to pick up the slack, providing a boost to overall credit.
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Officials have also promised to cut interest rates and unleash long-term interbank liquidity to encourage lending.
The PBOC is having to balance its competing goals of supporting growth and preventing the yuan from depreciating too fast. It’s so far held back from easing monetary policy with steps such as a cut to banks’ reserve requirement ratio, since that could put more pressure on the yuan and fuel capital outflows.
Policymakers are also likely keeping some stimulus in reserve should it be needed to contain trade shocks after Donald Trump’s inauguration as US president this month.
