Chinese Credit Growth Slows Sharply in April as Lockdowns Bite

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By Geoffrey Smith -- Credit growth in China slowed sharply in April, as extended lockdowns due to COVID-19 kept the pressure on a struggling economy.

Net new loans fell to 645.4 billion yuan ($95 billion) from 3.130 billion yuan in March, its lowest since February 2018, as lockdowns in Shanghai, the province of Jiling, and elsewhere all hit activity. Nomura analysts estimate that over 300 million Chinese, including those around the key port area of Shanghai, are living under some form of mobility restrictions.

The People's Bank of China also blamed supply shortages and high raw material costs for the slowdown. China is the world's largest importer of oil, prices for which have soared since Russia's invasion of Ukraine.

Total social financing, China's broadest credit aggregate, also slowed sharply to a level not seen since March 2020. At 910 billion yuan, it was less than half the 2.15 billion expected and down 80% from March's 4.65 billion.

The numbers underline the problems that the Chinese authorities are having in reflating an economy that was already struggling from the collapse of a real estate bubble. Shimao, one of the country's biggest developers, said on Friday that its contracted sales were down 76% on the year in April.

Activity surveys showed both manufacturing and services in contraction last month, and the International Monetary Fund and private-sector economists have cut their estimates for Chinese growth this year to well below the 5.5% official target set by Beijing. The IMF sees growth at 4.4%, while Goldman Sachs analysts say it may only grow 4.5%.

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