China February new bank loans dip more than expected, lending growth at record low

New bank lending in China fell more than expected in February from a record high the previous month, even as the central bank seeks to spur sluggish economic growth and fight deflationary pressures.

Chinese banks extended 1.45 trillion yuan ($201.5 billion) in new yuan loans in February, according to Reuters calculations based on data released by the People's Bank of China, or PBOC, down sharply from January and falling short of analysts' expectations.

Outstanding yuan loans grew 10.1% from a year earlier — the lowest on record — compared with 10.4% growth in January. Analysts had expected 10.2%.

A pull-back in February from January was widely expected, because Chinese banks tend to front-load loans at the beginning of the year to get high-quality customers and win market share.

The timing of the week-long Lunar New Year holiday, which fell in February this year versus late January in 2023, may also have weighed on lending activity last month.

Analysts polled by Reuters had predicted new yuan loans would fall to 1.50 trillion yuan in February from 4.92 trillion yuan the previous month and against 1.81 trillion yuan a year earlier.

"Aggregate financing and new loans came in weaker than expected amid limited high-quality borrowing demand, showing the limited immediate impact of February's cut in the required reserve ratio," analysts at ING said in a note.

"Although the PBOC has signaled further RRR cuts to come, a lack of high-quality borrowing demand could limit the effectiveness of RRR cuts in stimulating the economy."

Chinese banks made 6.37 trillion yuan in new yuan loans in the first two months of 2024, data released by the central bank showed on Friday.

It did not give loan figures for February alone.

Household loans, mostly