New bank lending in China fell more than expected in May from the previous month, but broader credit growth quickened as the central bank continues to ease policy to get the economy back on solid footing after the shock from the coronavirus crisis.

Analysts polled by Reuters had predicted new yuan loans would fall to 1.50 trillion yuan in May, although new loans were higher than 1.18 trillion yuan in the same month last year.

Household loans, mostly mortgages, rose to 704.3 billion yuan in May from 666.9 billion yuan in April, while corporate loans fell to 845.9 billion yuan from 956.3 billion yuan.

Broad M2 money supply in May grew 11.1 per cent from a year earlier, below estimates of 11.3 per cent forecast in the Reuters poll. It rose 11.1 per cent in April.

Outstanding yuan loans grew 13.2 per cent from a year earlier compared with 13.1 per cent growth in April. Analysts had expected 13.2 per cent.

“We think credit growth will continue to accelerate in the months ahead given loose monetary conditions, political pressure on banks to lend more and plans for a further ramp up in government borrowing,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“This should drive a strong rebound in investment and help shore up economic activity in the near-term. But further ahead, another round of state-led stimulus will worsen resource allocation and lead to a jump in debt levels.”