Geoffrey Smith 

Investing.com — China saw credit growth pick up in May after the central banking urged China’s banks to be more supportive of an economy in turmoil due to COVID-19 lockdowns. 

According to the People’s Bank of China, China’s broadest measure of economic lending grew by 2.79 trillion Yuan ($417 Billion) in February after a slump of only 910 billion yuan one month prior. This was when Shanghai, the financial center of China, joined the COVID-19 list of cities and regions under lockdown.

Issued rose by 1.89 trillion yuan to 1,045 billion in a month, which is the highest level of any four-year period.  The year’s growth rate rose to 11.1%, up from 10.5%. It defied all expectations that it would slow down to 10.4%.

In May, The PBoC urged banks that they lend more to small- to medium-sized companies. This was a request by many service sectors which were particularly affected by the lockdowns. Although analysts saw little economic benefit from it, the PBoC had also reduced its reference rate on five-year mortgages. In a larger, more coordinated package of fiscal and monetary assistance, the PBoC’s actions were part. The fiscal support was crucial in supporting demand.  

On Friday, hopes for greater support by the central bank through interest rate reductions rose after Beijing stated that the 2.1% inflation rate would remain unchanged in May. This was contrary to the worldwide trend towards higher prices. Also, the rate of interest rates fell to 6.4% after a thirteen-month low.

As China’s lockdown has prevented nearly 500,000,000 people from accessing shops, trains and workplaces in the past two months, analysts have had to reduce their forecasts of China’s growth this year. On Thursday, the Organization for Economic Cooperation and Development reduced its estimate to 4.4% from a previous 5.1%. Still, the government forecasts 5.5%. 

The hope of a sustainable revival in economic activity was high after Shanghai and Beijing had relaxed mobility restrictions over the last few weeks. Shanghai’s authorities placed half of Shanghai’s 25,000,000 inhabitants under restrictions Friday, after they detected 11 COVID-19 cases in what appeared to be an outbreak.