Chinese loan growth sees big jump

In January, Chinese yuan loan growth increased by CNY 3.49trillion - a 12.1%YoY increase. This number is pretty big, but not massively different from our expectations of CNY3.22 trillion, as it is usual for Chinese banks to see their loan books swell in the early months of the year.

Aggregate financing increased by CNY5.07 trillion - the highest since the current data series started. This is considerably larger than our expectations of CNY4.14 trillion.

The big difference lies in the net issuance of government bonds of CNY761.3 billion - an increase of CNY591.3 billion year-on-year. These issuances could have been used to provide support to the already battered economy suffering from the trade and technology war.

The People's Bank of China has set up a special re-lending programme, which offers low-interest-rate loans to corporates that have directly been impacted by coronavirus since the beginning of February. This means loan growth is likely to increase more than usual after the Chinese New Year.

However, this alone won't be enough. The government will continue to issue bonds to support stimulus for individuals that are out of work and corporates that are facing cash flow problems. Therefore, we think aggregate finance in February will grow by a similar amount as in January.