The pace of new Chinese bank lending slowed significantly in March, dropping to 510.7 billion yuan ($75 billion) from February’s figure of 700.1 billion yuan.
Chinese banks usually step up their new loans in the final month of each quarter, so economists reckon that there must have been a strong signal from above to dampen things down. M2 money growth also dipped.
There are different views about what the wider implications are for the economy. At Barclays Capital, Wensheng Peng suggests that "monetary conditions have tightened considerably" and that there has been a "sharp slowdown in real credit growth". This is not enough to derail economic growth of around 9.6% for the year. However, Barclays Capital is forecasting the People’s Bank of China will hike the interest rate in the "latter part of Q2, when CPI inflation rises to about 3%".
At Morgan Stanley, meanwhile, the economists reckon the dip in new loan growth "lowers the risk…of an interest rate hike this month, especially if CPI inflation turns out to be below 2.5% in March".
Finally, at Goldman Sachs, Yu Song also believes the March figures "represent a meaningful liquidity tightening, especially in light of the fact that March tends to be a month with a large amount of credit expansion". However, Goldman points out that more money is flowing into Chinese companies from overseas. The bank reckons that policymakers in Beijing are still erring on the cautious side and suggests that "although we are likely to see some more policy tightening measures in the near term, policy stance in Q2 is unlikely to be much tighter than it was in Q1." Goldman suggests that Beijing will only be jolted out of this view around July, when inflation starts to tick up and demand some more concrete monetary policy.