China's total social financing reached RMB1.75 trillion, down 15% from that of the first quarter. It compares with a record-breaking RMB2.5 trillion in March, according to the People's Bank of China.
While the pace of growth has slowed, April's number is still robust and indicates an easy liquidity environment in China. The numbers also beat market expectations by 17%.
Total social financing is a measure of the aggregate amount of capital support to the real economy given by financial institutions, covering all intermediate markets such as loans, bonds, and equities.
As to new loan growth, it also normalized during April at RMB793 billion, lower than March's RMB1.06 trillion. But it beat market expectations by 5%.
The healthy credit condition is coupled with tepid inflation. Consumer price index rose 2.4% year-over-year, well below the government's target of 3.5% for the year.
Producer price index declined 2.6% year-on-year because of sluggish domestic demand.
The April economic and monetary numbers make ANZ (The Australia and New Zealand Banking Group) to forecast an increasing likelihood for the Chinese central bank to cut policy rate by 25 basis points (or 0.25 percentage point) this year.
While other central banks in Asia cut interest rates to ease the pressures of currency appreciation, China doing the same will reduce hot money inflows to its delicate economy.
Sanford Bernstein echoes ANZ's projections. Its research team is also forecasting that the People's Bank of China may take further monetary easing policies in the next two to three months if growth continues to decelerate.
But Goldman Sachs Gaohua sees China's central bank staying put in the near term, at least until the second half of the year. It sees growth potentially accelerating during the latter half of 2013. In that case, the PBOC will have no need to ease monetary policy.
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