BEIJING - Chinese banks throttled back new lending in April after a record first quarter that sparked fears of more bad loans, but analysts say the central bank will likely have to step up support for the economy as trade tensions with the United States escalate.
U.S. President Donald Trump stunned financial markets this week by announcing he will hike tariffs on Chinese goods on Friday unless Beijing agrees to a trade deal, sharply escalating their dispute after months of negotiations. Beijing has vowed to retaliate. Chinese banks extended 1.02 trillion yuan in net new yuan loans in April, the central bank said on Thursday, well below analysts’ expectations of 1.2 trillion yuan in a Reuters poll and March’s surprisingly strong 1.69 trillion yuan.
The credit data was released unexpectedly early, hours ahead of the resumption of last-ditch U.S.-China trade talks and a day ahead of the threatened U.S. tariff hike. The data is typically released between the 10th and 15th of every month. But analysts noted much of the pick-up was due to higher pork prices, and the trend did not stand in the way of policymakers if further easing is needed to offset mounting trade pressures. The CPI reading remained below the government’s annual target of around 3 percent.
“There is still a lot of slack in the economy. This means the PBoC has room to look past temporary shocks in pork or oil prices and focus instead on core inflation,” which has been relatively steady.Some analysts believe the PBOC has less room to ease monetary policy this year after it cut RRRs and interest rates aggressively in past economic downturns. Beijing has been leaning more on fiscal stimulus this time, counting on higher infrastructure spending and tax cuts to stoke growth.
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