Has the latest Covid-19 outbreak damped China’s loan growth?

Growth in new yuan loans — a measure of the total value of loans given by banks in China to businesses and consumers — slowed by more than expected in February, rising by just Rmb1.23tn compared with economists’ forecasts of Rmb1.49tn. The shortfall has put pressure on authorities to take further action to support the economy.

Analysts at BNP Paribas predict that new loans for March will rise to Rmb2.9tn. But with about 120 Chinese cities affected by China’s biggest Covid-19 outbreak since the pandemic began, the figure for March - due out on April 8 - carries a downside risk, said Xingdong Chen, chief China economist at the French bank.

“Because between growth and Covid control, local government to me is taking Covid control as a priority,” Chen said. “That is unfortunate.”