China: New November Bank Loans Increase Less Than Expected As Position Shifts Towards Easing

Chinese banks granted 1.27 trillion yuan ($ 200.19 billion) in new yuan loans in November, up from October but below analysts’ expectations, according to data released Thursday by the People’s Bank. of China (PBOC).

The new loan amount was the lowest for November since 2018, although broader credit growth accelerated.

Analysts polled by Reuters had predicted that new loans would reach 1.560 billion yuan in November, against 826.2 billion yuan the previous month and 1.430 billion yuan a year earlier.

Loans to households, mainly mortgages, reached 733.7 billion yuan in November from 464.7 billion yuan in October, while loans to businesses rose from 310.1 billion yuan to 567.9 billion yuan. yuan, according to central bank data.

“We believe that credit growth could increase further in the coming months as efforts to lower borrowing costs and support the housing market intensify,” said Julian Evans-Pritchard of Capital Economics in a note.

“That said, policymakers still seem to be trying to balance their desire to ease the economic downturn with their concerns about high debt levels. As such, we don’t anticipate a sharp increase in lending of the kind that could result in a sharp rebound in growth. “

China’s economy, which experienced an impressive rebound from last year’s pandemic crisis, has lost momentum in recent months as it grapples with soaring prices, a slowing manufacturing sector, problems debt in the real estate market and persistent epidemics of COVID-19.

The central bank on Monday announced that it would cut banks’ reserve requirement ratio (RRR) on December 15, its second such move this year, freeing up 1.2 trillion yuan in long-term liquidity to support the slowdown in the economy. growth.

On Tuesday, the PBOC cut rates on its repayment facility by 25 basis points (bps) to support the rural sector and small businesses.

Nonetheless, analysts believe economic growth will continue to slow until 2022 and expect further cautious policy easing in the coming months.

Barclays expects a series of 5-10 basis point cuts to open market rates, the medium-term lending facility and the benchmark loan prime rate, or LPR, by March 2022 and another drop in RRR in the first trimester. Citi expects a 25bp rate cut in the second quarter of 2022 and another drop in the RRR next year.

Growth in the total social finance stock (TSF), a broad measure of credit and liquidity in the economy – a closely watched indicator – accelerated slightly to 10.1% in November compared to the year previous and 10.0% in October.

China has said it will continue to implement proactive fiscal policy and prudent monetary policy next year. It will keep economic operations within a reasonable range in 2022, the Politburo, the country’s top decision-making body, said this week.

The broad M2 money supply increased 8.5% from a year earlier, according to central bank data, below estimates of 8.7% predicted in the Reuters poll. M2 increased 8.7% in October compared to a year ago.

The outstanding amount of yuan loans increased 11.7% in November compared to the previous year – the lowest since May 2002 – against a growth of 11.9% in October. Analysts had expected 11.9%.

TSF includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.

In November, the TSF rose to 2.61 trillion yuan from 1.59 trillion yuan in October. Analysts polled by Reuters had expected a November TSF of 2.70 trillion yuan.

(Reporting by Judy Hua and Kevin Yao; Editing by Kim Coghill)

By Judy Hua and Kevin Yao

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