Analysts also attributed the surge in new loans to soaring demand for mortgages as property prices recover and government steps to fast-track infrastructure projects to spur activity. While economists have sometimes speculated that big swings in China’s credit data were linked more to speculative activity, the latest data appeared to suggest solid demand in the real economy. Medium-and long-term loans to households were up 45% in January from the same period a year ago while such loans to companies jumped 73%.
Total social financing, another important indicator of China’s credit expansion, rose to 3.42tn yuan in January from 1.82tn yuan in December.
Part of that may reflect massive infusions of cash into the banking system by the People’s Bank of China ahead of the long holiday to avert any risks of a cash crunch. The PBoC injected 1.53tn yuan via its standing lending facility (SLF), medium-term lending facility (MLF) and pledged supplementary lending (PSL).
Some economists believe the PBoC is currently favouring liquidity injections as a policy tool rather than long-expected cuts to its policy interest rate and bank reserve ratio requirements (RRR), which authorities worry could put further depreciation pressure on the yuan currency.  According to sources, Zhang Xiaohui, an assistant governor at the PBoC, has said the central bank would not rush to cut the amount of cash banks must hold in reserves, as doing so could send a strong signal on policy easing.
But while the central bank may shun further cuts in its main interest rate and RRR in the near term, it may still have to ease policy again, analysts say.  The PBoC has cut its policy rate six times since November 2014 and reserve requirements several times, but both remain relatively high, giving it plenty of room.
“As capital outflows continued, we believe that the PBoC will still need to lower the reserve requirement ratio (RRR) to permanently inject liquidity into the economy,” wrote ANZ economists in a research note, noting that a further cut in RRR was still possible in the first quarter.
Bank lending usually spikes in China in January as banks, which face limits on how much they can lend each year, squeeze as much lending as possible into the first month to protect their market share.
The spike in new loans in January also could be due to Chinese companies making early repayments of their foreign-denominated loans and bonds to reduce their currency exposure after the yuan weakened, analysts say.
China Eastern Airlines said last month it had recently repaid $1bn worth of dollar debt to reduce its exposure to currency volatility.
Broad M2 money supply (M2) in January also rose to a 19-month high of 14% in January from a year ago, beating expectations of 13.4% and December’s 13.3%.
The world’s second-largest economy grew 6.9% in 2015, its weakest in a quarter of a century, as activity was weighed down by sluggish demand at home and abroad, massive industrial overcapacity, cooling investment and a weak property market.
Even with more rate cuts, economists see growth cooling further to 6.5% this year, and some market watchers believe real growth levels may already be much weaker.
Meanwhile, China’s central bank issued a slew of measures yesterday to increase financial support to its struggling industrial sector, in the latest efforts to counter a prolonged economic slowdown. The PBoC will guide banks to boost lending to support industrial upgrading and maintain adequate liquidity for industrial structural adjustment, it said in a document jointly issued with seven other top ministries and regulators.
It would also step up the disposal of bad assets and slash lending to zombie firms while promoting mergers and acquisitions among firms, the central bank said.
“The differentiated credit policy will ease market concerns about a sharp fall in credit caused by closure of excess production capacity,” analysts at Minsheng Securities wrote in a note. The central bank would guide steady growth in credit and money supply and use various tools to maintain adequate liquidity, according to the document on its website.
“We need to further enhance the service ability of the financial sector to help industrial firms solve the problems of financing difficulties and high funding cost,” it said.
For competitive large-and medium-sized firms which have the ability to repay debt, banks can restructure their loan maturity to help them solve short-term funding shortages, it said.