PBoC likely to stay accommodative in the short term

China's M2 growth and January CNY new loans came in better than expected. M2 growth was 14.0% y/y, showcasing the large liquidity provision by the PBoC before the Chinese New Year, while CNY new loans grew at 2.51 trillion CNY in January, as compared to 598 billion CNY in December.

Household and corporate loans were strong at 607.5 billion CNY and 1.94 trillion CNY, respectively. Long-term household increased to 478 billion CNY, against previous print of 292 billion CNY, reflecting a continuous growth in mortgage and personal consumption-related lending.

"In view of continued headwinds to the outlook, we expect monetary policy to stay accommodative for an extended period beyond short-term liquidity provisions. Therefore, we continue to look for two 50bp RRR cuts and two 25bp benchmark rate cuts in H1 16 to support liquidity and lending" says Barclays in a research note.