China's Bank Lending Expanded in April

Strong demand from households and businesses drove up bank lending last month, though nontraditional credit slowed as the authorities moved to restrict shadow banking.

Chinese financial institutions issued 1.1 trillion yuan ($159.3 billion) worth of new loans in April, up from March's 1.02 trillion yuan, data from the People's Bank of China, the nation's central bank, showed Friday.

April's new yuan loans were well above the 766.5 billion yuan median forecast by economists in a Wall Street Journal poll.

"Both companies' and households' demand for bank loans proved stronger than our expectations" in defiance of seasonal patterns, said Chen Ji, an economist at Bank of Communications.

Medium- and long-term corporate loans, an indicator of loan demand, stood at 522.6 billion yuan in April, the highest of the month in the past 10 years, said economists of the Australia and New Zealand Banking Group.

April's surprise credit expansion could also have been due to front-load funding demand ahead of further expected regulatory tightening, ANZ economists said.

Chinese local governments have rolled out more measures to cool down a still-robust property market, such as higher down payments and mortgage rates. Financial regulators have also increased scrutiny of risks. The government's tightening stance has dampened investors' sentiment in domestic financial markets.

Total social financing, a broader measurement of credit in the economy that includes nonbank lending as well as bank loans, came to 1.39 trillion yuan in April, down from 2.12 trillion yuan in March.

The portion of shadow banking in total social financing dropped to 12.7% of the newly increased social financing from 35.6% in March, Citi Group economists said. The regulatory tightening has also shown impact on banks' off-balance sheet credit, they said.

Nontraditional lenders, such as trust companies and other nonbank companies, are known as shadow bankers because they operate outside the traditional banking system.

Beijing has adopted rules to make it more difficult for companies to borrow from shadow bankers, concerned that defaults could pose a risk to financial stability.

The authorities will probably be cautious in pushing their deleveraging efforts, so as not to squeeze the financial companies too much and trigger any systemic risks, said Mr. Chen of Bank of Communications.

China's broadest measure of money supply, M2, was up 10.5% at the end of April from a year earlier, slightly lower than the 10.6% rise at the end of March. The figure was below the median 10.7% increase forecast by the polled economists.

The Chinese government also sharply scaled back fiscal spending in April as revenue growth slowed, official data showed Friday.

National fiscal expenditure, central and local governments included, rose 3.8% last month from a year earlier, compared with March's 25.4% increase, the finance ministry said.

Fiscal revenue rose 7.8% in April from a year earlier, the ministry said, moderating from 12.2% growth in March. Revenue growth will probably continue easing over the rest of the year amid an expected slowdown in economic activity and the impact of tax cuts, the ministry said.

Liyan Qi

(END) Dow Jones Newswires

May 12, 2017 08:34 ET (12:34 GMT)