Total lending to the real economy in China was significantly lower than expected in April, highlighting the negative economic fallout from the lockdowns and restrictions in place in a number of cities. The increase in new Total Social Financing (TSF) was only around half that of April 2021, although year-to-date it is still 7% higher than last year. Particular softness was evident in new renminbi bank loans. Household loans contracted amid falls in mortgage loans, consumer loans and business loans. The People’s Bank of China pointed to the negative effect of recent spikes in COVID-19 cases on borrowing, noting a significant drop in demand for financing from small and medium-sized enterprises. With the economy looking extremely weak in the second quarter, further policy stimulus is highly likely from the authorities. The government’s 5.5% growth target for the year looks more difficult by the day.
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