Large increase in total financing for companies signaling a brighter future, expertsbelieve
The growth in demand for credit, underpinned by an improvement in economic activity, surgedhigher than expected in March, signaling a brighter outlook, analysts said.
Total social financing, the People's Bank of China's gauge of aggregate financing, added arecord 2.34 trillion yuan ($361 billion) in March, far outpacing the consensus of 1.4 trillion yuan.
That was up from 730 billion yuan growth in February, and 1.25 trillion yuan in March 2015.
Total social financing includes bank loans, bonds, trust loans and equity flows to companies.
Outstanding total social financing by the end of March stood at 144.7 trillion yuan, according tothe People's Bank of China. A total of 6.59 trillion yuan was added to outstanding total socialfinancing in the first quarter, compared with 4.66 trillion yuan a year earlier.
Total social financing was boosted by a surge in bond sales. Corporate bond sales hit a recordhigh of 1.24 trillion yuan in the first quarter, compared with just 320 billion in the first quarter of2015.
Corporate bonds now account for 18.8 percent of total social financing, up from just 8.4 percent ayear ago.
Sheng Songcheng, director of the surveys and statistics department with the PBOC, said thecredit figures also underlined structural change in the real economy. He noted that outstandingmedium-to-long term loans to industries plagued by overcapacity dropped for the first time inyears. Loans to the steel industry slumped 7.5 percent from a year ago and to the buildingmaterial industry plunged 10.3 percent.
Financing costs also fell slightly, though not as much as in 2015. Average corporate borrowingcosts by the end of March were 4.55 percent, down 76 basis points from the end of 2015 and228 basis points from the first quarter of 2015.
"The government's intent to prop up the economy is turning into reality. The eased pressure onrenminbi depreciation and capital outflow has made it easier to ease monetary conditions. Sincethe effects of policy have a time lag, we expect the upward cycle to continue," said Chang Huili,an economist with China International Capital Corp.
