China loans grows but some analysts see no crisis ahead

Data from the People's Bank of China on Friday showed that China's banks extended 1.1 trillion yuan in net new local currency loans in April, rising from 1.02 trillion yuan in March, though household loans fell to 571 billion yuan from 797.7 billion yuan.

Analysts were not alarmed by the data.

“April's credit expansion could have been due to front-load funding demand ahead of regulatory tightening, and the risk tilts to the downside in the coming months,” said ANZ's China economists David Qu and Betty Wang in client note.

Julian Evans-Pritchard, China economist at Capital Economics concluded that “the deceleration in credit growth which began last summer continued uninterrupted last month with a pick-up in loan growth more than offset by a decline in bond issuance”.

Indeed, an article by Bernstein’s Michael Parker and Kelman Li concluded that while China had “lots of debt”, they see “no crisis”.

“So, yes, tightening – in the form of a slowdown in credit formation growth - is likely in the second half,” they wrote. “But that tightening is, in our view, the next step in the rehabilitation of Chinese policy making… and equity markets.”