By Kevin Yao
BEIJING (Reuters) - China's banks extended a record 2.9 trillion yuan ($458.3 billion) in new yuan loans in January, blowing past expectations and nearly five times the previous month as policymakers aim to sustain solid economic growth while reining in debt risks.
Net new loans surpassed the previous record of 2.51 trillion yuan in January 2016, which is likely to support growth not only in China but underpin liquidity globally as major Western central banks begin to withdraw stimulus.
Chinese banks tend to front-load loans early in the year to get higher-quality customers and win market share, but the lofty January figure was even higher than the most bullish forecast by economists in a Reuters poll.
Analysts polled by Reuters had predicted new yuan loans of 2 trillion yuan, up sharply from December's 584.4 billion yuan.
Beijing is in the second year of a regulatory push to contain financial risks and clamp down on riskier types of financing that have been fuelled by a rapid build-up in debt. But authorities are proceeding cautiously to avoid any sharp blow to economic growth or excessive financial market volatility.
Broad M2 money supply also beat expectations, growing 8.6 percent in January from a year earlier, central bank data showed on Monday. Economists had expected the growth rate to edge up to 8.4 percent from 8.2 percent in December.
After the December data was released, PBOC spokeswoman Ruan Jianhong said the weak M2 growth was caused by a crackdown on banks' off-balance sheet activities and that lower M2 growth may become a new normal.
CREDIT STILL AMPLE
Outstanding yuan loans grew 13.2 percent from a year earlier, also faster than an expected 12.5 percent rise and compared with an increase of 12.7 percent in December.
Last year China's total new loans hit a record 13.53 trillion yuan, 7 percent more than the previous record in 2016.
The credit boom has been fuelled by strong economic growth, a robust property market and a crackdown on riskier shadow lending, which has forced banks to shift such loans back onto their balance sheets.
Since the start of 2017, Chinese regulators have announced a slew of steps to coax financial institutions to reduce riskier activity and leverage, targeting everything from interbank lending levels to bond trading, negotiable certificates of deposit and entrusted loans.
The PBOC has also been gingerly nudging up money market interest rates, most recently in December, but rates have also been slowly creeping higher on their own as regulators look set to persist with the "de-risking" campaign much longer than policy crackdowns in the past.
Those efforts are showing some progress. The outstanding amount of banking wealth management products (WMPs) grew just 1.7 percent last year, compared with a near 24 percent rise in 2016. Many of these products had strong links with the less regulated shadow banking sector.
Analysts expect authorities to step up their efforts this year, focussing on local government debt, rising corporate and household debt levels and dealing with "zombie" companies.
But analysts say more still needs to be done on structural reforms to rein in ballooning corporate debt, which has reached that the IMF and others have warned sharply raises the risks of a financial crisis.
China's total social financing (TSF), a broad measure of credit and liquidity in the economy, surged to 3.06 trillion yuan in January from 1.14 trillion yuan in December, the data showed on Monday.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
That can provide hints of activity in China's vast and unregulated shadow banking sector, which authorities have also been targeting in their campaign to reduce systemic risks.
China: an economic snapchot - http://tmsnrt.rs/2lQ48De