(Yicai) April 14 -- Credit and social financing growth accelerated in China last month, according to the latest official data, signaling a recovery in corporate and household demand.

Yuan-denominated lending rose by CNY9.78 trillion (USD1.34 trillion) in the first quarter, swelling outstanding yuan loans to CNY265.41 trillion as of the end of March, a 7.4 percent increase from a year earlier, according to the data released yesterday by the central bank. 

China’s banks extended CNY3.64 trillion last month, up CNY547 billion year on year and exceeding the average forecast for of a little over CNY3 trillion made by chief economists surveyed by the Yicai Research Institute.

Average interest rates on newly issued loans for businesses and homebuyers fell to 3.3 percent and 3.1 percent, respectively, down 45 and 60 basis points from a year earlier.

The balance of M2 -- a broad measure of money supply that covers cash in circulation and all deposits -- was CNY326.06 trillion (USD44.7 trillion) at the end of March, up 7 percent from a year ago, aligning with the average forecast from the chief economists.

Meanwhile, M1 -- a narrow gauge of money supply that covers circulating cash and non-bank and non-government deposits -- was CNY113.49 trillion, up 1.6 percent year on year and 1.5 percentage point higher month on month.

Industry experts noted that the manufacturing purchasing managers’ index rebounded to 50.5 percent in March, indicating renewed confidence, while accelerated progress in major infrastructure projects generated revived demand for financing.

In major cities, a more active real estate market drove increased demand for mortgages, they said, adding that recent consumption-boosting measures across various regions have also supported the growth of consumer borrowing, contributing to the rise in overall lending.

Outstanding aggregate financing reached CNY422.96 trillion by March-end, up 8.4 percent from a year earlier, the data showed. In the first quarter, total aggregate financing rose by CNY15.18 trillion, CNY2.37 trillion more than the same period of last year.

Analysts noted that social financing is mainly made up of loans and government bonds. In March, alongside strong credit growth, a rapid increase in government bond issuance also quickened the pace of social financing expansion.

The rebound in credit demand is mainly down to economic policy adjustments and stabilizing expectations, according to the experts. A series of support measures unveiled last year and a faster pace of government bond sales and fiscal spending since early this year have bolstered demand in the real economy, driving credit growth, they noted.

“There’s still solid support for continued overall financial expansion in the next phase,” a senior analyst pointed out. Amid heightened external uncertainties, the central bank will maintain ample liquidity and flexibly deploy countercyclical tools to hedge against potential risks, said Wang Yifeng, chief financial analyst at Everbright Securities.

Editor: Tom Litting