Key facts
- China's new bank loans grew by 520 billion yuan in May, surpassing forecasts.
- Corporate bill financing was the primary driver of loan growth.
- Household credit continued to decline, with net loan repayments.
- Total social financing expanded by 2 trillion yuan in May.
- Government bond issuance dominated aggregate financing.
- M2 and M1 showed year-on-year growth of 8.6% and 5.5% respectively.
China's new bank loans experienced a positive rebound in May, exceeding market expectations with a total of approximately 520 billion yuan. This growth was largely propelled by a significant surge in corporate bill financing, which reached nearly 560 billion yuan. The expansion in corporate credit helped offset a continued contraction in household borrowing, evidenced by net loan repayments of 141.1 billion yuan, reflecting ongoing weakness in the property market and deleveraging trends.
Overall, total social financing, a broader measure of credit and liquidity, expanded by 2 trillion yuan in May. Government bond issuance was a dominant component of this aggregate financing, accounting for 1.2 trillion yuan. On the monetary front, M2 grew by 8.6% year-on-year, while M1 saw a rise of 5.5%.
Despite the headline loan growth, the latest credit data points to persistently sluggish consumption and weak investment across China. Analysts noted that households' weak appetite for debt is increasingly spilling over into the corporate sector, with manufacturing investment weakening notably since March due to corporate deleveraging and geopolitical tensions. Government efforts to boost household demand have yielded limited results.