China’s March credit picture is out. The latest data from China’s central bank shows commercial banks extended over 1 trillion yuan in new loans last month, handily beating market expectations. Analysts say the increase in new loans further adds evidence of an economic recovery fuelled by ample credit conditions.

Chinese financial institutions issued 1.06 trillion yuan of local currency loans in March, an increase of 51.5 billion yuan compared to the previous month. Broad money supply or, M2, rose 15.7 percent year on year in March, exceeding 100 trillion yuan for the first time. In the past decade China’s M2 money supply has seen a sixfold increase. The data signals the government’s determination to keep credit flowing to maintain steady growth.

Dr. Kenneth Kim, Finance Dept. of School of Business, Renmin Univ., said, “It’s good that credit is available now as China needs it, make sure being used to fuel the economy.” However, the easing of credit flow also triggered concerns about reigniting inflation, which China’s central bank currently say is stable, but with an uncertain outlook.

“In the past, increasing the M2 is an important monetary policy to support growth. But today no longer the case, fuelling inflation, China will not increase money supply soon," said Dr. Kenneth Kim.

China’s economy suffered its slowest year of growth in 13 years in 2012. The government has given no public forecast for new lending this year, but analysts broadly expect a figure between 8.5 to 9 trillion yuan, an expansion versus last year.

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