Summary: China released a series of very weak credit and economic data which pointed to contraction in economic activities in April. On the positive side, there is finally light in the tunnel for Shanghai to emerge from lockdown in June. The April data was history and the determining factor for the pace of growth of the Chinese economy to a large extent lies on the development of the Covid outbreaks and lockdown. Qiushi Journal’s publication of new excerpts from an old speech of President Xi highlighted the priority of regulating private capital in the Chinese authorities’ agenda.

Growth of Aggregate financing failed to gain traction.

New aggregated financing fell sharply to RMB910 billion in April (Bloomberg consensus: RMB2,200bn; March: RMB4,653 bn). The rate of growth of outstanding aggregate financing dropped to +10.2% YoY in April from +10.6% in March and back to the level as in February (Figure 1). After hitting the growth rate trough in September last year, aggregate financing hovering between 10% and 10.5% and failed to gain traction to break to the upside despite numerous government rhetoric as well as effort to kick-start faster credit creation. New RMB loans slumped to RMB645 billion (Bloomberg consensus RMB1,530 bn; March RMB3,130bn). New loans to corporate slumped to RMB578 billion from RMB2,480 billion in March.

Mortgage lending was weak with outstanding mortgage loans contracted RMB61bn from the level in March. Reportedly, the People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) have been calling on banks to lend to corporate and households but loan demand have been weak and at the same time banks are reluctant to lend as they are afraid of holding the bag when loans turning sour.

Yesterday, in their latest effort to boost mortgage lending, the PBoC and the CBIRC jointly announced a cut of 20bps of the floor mortgage rates for first-time home buyers to 20bps below the 5-year long-term prime rate (LPR which is currently 4.6%). In other words, the mortgage floor is effectively reduced from 4.6% to 4.4%. However, most banks are currently charging a premium to the LPR and the average mortgage rate for first-home buyers is about 5.2%. In other words, the mortgage rate floor currently is not a binding lower limit on banks mortgage lending anyway. How much banks will pass on the decline in the mortgage rate floor to first-time home buyers is questionable. Demand for mortgage loans is weak. New home sales for the top 100 developers plunged to -61.2% and -58.6% YoY in April as more than 40 cities were under various degrees of lockdown or mobility restriction.

https://www.fxmag.com/forex/china-update-a-swamp-of-weak-economic-d...