China’s credit growth surged in March, surpassing expectations as Beijing ramped up government bond issuance to cushion the economy against mounting pressure from US tariffs.
According to data released Sunday by the People’s Bank of China (PBOC), aggregate financing — a comprehensive gauge of credit and liquidity in the economy — reached 5.89 trillion yuan ($808 billion). That marks an almost 22% increase compared to the same period last year, and far exceeds the 4.96 trillion yuan median forecast from economists surveyed by Bloomberg.
The rise was largely driven by a spike in government bond sales, with net sovereign and local bond financing totaling nearly 1.5 trillion yuan — the highest for any March since at least 2017. This aggressive fiscal front-loading reflects China’s preemptive strategy to counter the economic headwinds created by escalating trade tensions with the United States.
Financial institutions issued 3.64 trillion yuan in new loans last month, also outpacing expectations of 3 trillion yuan. The PBOC data points to a seasonal boost as well, with banks typically ramping up lending at the end of a quarter to meet performance benchmarks.
Tariffs Bite as China Shields Economy
The robust credit numbers come amid intensifying economic pressure from US tariffs, which have now ballooned to 145% on Chinese goods — a level that economists warn could decimate bilateral trade flows, which totaled $690 billion in 2024.
“The jump in China’s credit in March suggests policy support is kicking in — giving the economy a bigger buffer to cope with the trade-war shock,” said David Qu of Bloomberg Economics.
Though China’s first-quarter growth likely remained resilient, the full brunt of trade restrictions is starting to take shape. US retailers are reportedly suspending orders and halting shipments due to the rising uncertainty.
Millions of manufacturing jobs and China’s target of around 5% economic growth this year are at stake. While the US on Friday exempted smartphones, computers, and other electronics from its reciprocal tariffs — covering over $101 billion worth of Chinese goods — analysts caution that Washington’s policy volatility continues to create deep economic uncertainty.
Credit Growth Shows Mixed Corporate Appetite
Despite the headline numbers, data indicates that businesses remain hesitant to make long-term investment commitments. Medium- and long-term corporate loan issuance remained slightly below last year’s levels.
Short-term business lending, however, spiked by more than 40% year-on-year. Economists at Nomura Holdings Inc. noted that this jump may be partly due to a low comparison base from a year earlier, when regulators cracked down on inflated loan reporting.
Goldman Sachs analysts echoed the view that the pattern in both loan and bond activity points to a “policy-mandated credit expansion.”
Monetary Policy and Housing Market Signals
The PBOC continues its efforts to lower financing costs. The weighted average interest rate for new corporate loans in March dropped to 3.3%, down 45 basis points from a year earlier, a publication affiliated with the central bank. Personal housing loan rates fell even further, down 60 basis points to 3.1%.
Meanwhile, household mid- and long-term loans — often used as a proxy for mortgage activity — rose year-on-year, buoyed by stable home sales in February. However, property sales declined again in March, indicating persistent fragility in the housing sector.
The money supply figures offered a mixed picture: M2, the broadest measure of money supply, expanded by 7% year-on-year — slightly below expectations. However, M1, which includes cash, household, and corporate demand deposits, climbed 1.6%, its strongest reading in a year and well above the forecasted 0.3% gain.
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