A recent survey suggests that China's new yuan loans are anticipated to have increased in March following a sharp decline in February, as policymakers are addressing the challenges of a deteriorating global trade war. Analysts forecast that banks issued around 3 trillion yuan in net new yuan loans last month, compared to 1.01 trillion yuan in February. This projection is slightly below the 3.09 trillion yuan issued in new loans in March 2024. Factors contributing to this forecast include soft overall credit demand due to low interest rates and limited household borrowing despite adjustments in consumer loan quotas.

In February, China experienced a significant drop in new bank lending following a record high in January. If the anticipated March data aligns with expectations, total lending for the first quarter would amount to 9.14 trillion yuan, slightly lower than the 9.46 trillion yuan in the same period last year. Despite China aiming for a growth target around 5% by 2025, challenges loom due to escalating trade tensions with the U.S. President Trump's imposition of increased tariffs on Chinese goods, with China responding in kind, has heightened economic uncertainties.

With growing concerns about the impact of higher U.S. tariffs on China's growth, Citi recently revised its China GDP forecast for 2025 from 4.7% to 4.2%. To mitigate external economic shocks, Chinese authorities are considering additional stimulus measures. State media commented on the potential for monetary easing through reserve requirement ratio cuts and interest rate reductions, as well as an expansion of fiscal deficits and issuance of special bonds.

Moreover, major state-owned banks in China have announced plans for recapitalization totaling approximately $72 billion, in line with Beijing's initiative to bolster their capital reserves and address asset quality challenges. Projections indicate that outstanding yuan loans are likely to rise by 7.3% year on year in March, consistent with February's pace. Furthermore, broad M2 money supply growth is expected to accelerate to 7.1% in March, up from 7.0% in February. Total social financing (TSF), a comprehensive measure of credit and liquidity in the economy, is anticipated to increase to 4.8 trillion yuan in March from 2.23 trillion yuan the previous month.