(Yicai) Jan. 27 -- China's rediscount rate for bills rose sharply at the end of the month, indicating increased demand for borrowing. Some banks may experience a big jump in credit growth this year, but then others may not, depending on their circumstances, industry insiders said. Whether credit lending can continue to expand this year remains to be seen.

Banks’ rediscount rates for three-month bills climbed 0.15 basis points on Jan. 24 to 1.95 percent, the highest since March 2024, while that of six-month bills advanced 0.06 bps to 1.48 percent. Both rates have risen significantly from a month earlier, with the former surging 194 bps and the latter jumping 90 bps.

This increase in rediscounting rates at the start of the year is seen as a sign by a number of institutions that credit will grow substantially this year. Regional banks, particularly small and medium-sized banks located in the economically developed Yangtze River Delta region, are confident about achieving significant credit growth in 2025.

For instance, Suzhou Bank said recently that its credit deployment during the peak season of 2025 has been favorable, resulting in a good start to the year in terms of credit growth. And Qingdao Bank said it plans to continue increasing its lending efforts in 2025, expecting steady growth in credit scale throughout the year.

Normally bill rates rise at the beginning of each year, but this year they tumbled in early January, implying that demand for borrowing in the real economy has not yet fully recovered, said Lin Yingqi, an analyst at investment bank China International Capital Corporation.

The high base effect from the previous year makes it difficult for lenders to log significant credit growth at the start of the year, particularly for larger banks, Lin added. Also, the Lunar New Year break falls early this year, which could distort data, while interbank deposit outflows and tight funding conditions might constrain lending.

Large banks face greater difficulties in achieving year-on-year growth due to higher base lines, whereas smaller banks, benefiting from relatively lower base lines in 2024 and buoyed by regional economic prosperity, may achieve better starts or be more pro-active, he added.

The slow recovery of demand remains an objective reality, which could lead to greater fluctuations in credit lending this year, an insider at a joint-stock bank told Yicai. After a strong start in January, banks are expected to continue to confront hurdles throughout the year.

Editor: Kim Taylor