China announces festive new yuan loans for January – but the data has a dark side

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Written on Feb 12, 2024

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China has announced record high new yuan loans data for January 2024.
This latest data showed that an all-time high 4.92 trillion yuan in loans were issued last month.
However, China's economy still appears to be floundering, and the data may conceal more than it reveals.

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The People’s Republic of China have released their new yuan loans data for January 2024. But, despite Saturday’s Lunar New Year and China’s famous Spring Festival currently being underway, the festive new data has a dark side.

What does the new yuan loans data mean?

New yuan loans data show the outstanding balances that lenders like banks have on their balance sheets for businesses and consumers.

While higher new yuan loans do mean rising debt, they’re considered a positive sign of the Chinese pumping money back into the economy with increased spending.

New year, new loans

Last month, China announced that its banks had issued a record amount of loans for the year 2023 – 22.75 trillion yuan. This represented an increase of almost 7% year-on-year from 2022’s new yuan loans.

Then, data released last week showed that Chinese banks had lent a total of 4.92 trillion yuan in January – a new record high that eclipsed even January 2023’s then-highest amount of 4.9 trillion.

This data seems to support the fact that China is slowly stabilising its economic growth, despite a difficult 2023.

More money, more problems

Yet, despite this, China’s balance sheet does not seem to be smiling.

For one thing, as China’s Central Bank itself said that bank loan figures in January – generally an especially busy month compared with others for Chinese institutions, and far more so than Decembers as a rule – do not signify much on their own and can be misleading.

Another factor to consider with the data is that it is also heavily influenced by the fact that the People’s Bank of China changed banks’ reserve ratio requirements earlier this month and that this allowed them more liquidity – rather than liquidity coming in from an increase in new loans taken out.

In fact, Chinese consumers and businesses actually seem reluctant to take out new loans. Yesterday, Reuters reported that China’s YoY loan growth fell to its lowest level in more than 20 years in December 2023.