Central Banks

China says monetary policy remains prudent despite a sharp drop in bank loans

China's central bank said it has not changed its "prudent" monetary policy stance despite a disappointing release of April data showing banks had cut back sharply on new loans.

Banks made 555.6 billion yuan ($85.21 billion) in net new yuan loans in April, much lower than expected and less than half the 1.37 trillion yuan seen in March, data showed on Friday.

The People's Bank of China (PBOC), in a question and answer posted on its website on Saturday, attributed the slide to seasonal and technical factors, including the fact that the figures don't include new local government bond issuance to refinance debt previously issued by local government financing vehicles.

"If this is factored in, new loans in April were more than 900 billion yuan," the PBOC said, in answer to a question as to whether the figures indicated a decline in the real economy.

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That number would match analysts previous forecasts for April.

However, the bank also pointed to a decline in corporate bond financing, which came in over 500 billion less than March - while still up slightly from the same period last year, and noted that banks remain cautious given increased focus on asset quality control.

"On the whole, current financial support to the real economy is still strong," it said.

"Prudent monetary policy has not changed."

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