China Sept bank loans rise less than expected, broader credit growth slows
New bank lending in China accelerated in September from the previous month but fell short of expectations, as the central bank tries to bolster the flagging economic recovery even as it keeps an eye on rising debt and bubble risks.
The world’s second-largest economy has rebounded from the depths of the COVID-19 pandemic but has shown signs of losing momentum, weighed by power shortages, supply bottlenecks and regulatory crackdowns on sectors from tech to property.
Chinese banks extended 1.66 trillion yuan ($257.69 billion)in new yuan loans in September, up from 1.22 trillion yuan in August, People’s Bank of China (PBOC) data showed on Wednesday.
Analysts polled by Reuters had predicted new yuan loans would rise to 1.85 trillion yuan in September. The tally was also lower than 1.9 trillion yuan a year earlier.
Household loans, mostly mortgages, rose to 788.6 billion yuan in September from 575.5 billion yuan in August, while corporate loans rose to 980.3 billion yuan from 696.3 billion yuan, central bank data showed.
“Against the backdrop of strict controls on property and debt of local government financing vehicles, the market should not have too high expectations (on credit),” said Luo Yunong, analyst at Industrial Securities.
“The key is to see when financing for household mortgages and real estate loans will be loosened, and how strong the fiscal policy is to offset the economic downturn.”
The PBOC is likely to keep banks’ reserve requirement ratio (RRR) unchanged in the fourth quarter, before delivering another 50-basis points cut in the first quarter of 2022, the latest Reuters poll showed.
China will stay with normal monetary policy for as long as possible and its potential economic growth rate is still expected to remain in the range of 5% to 6%, PBOC Governor Yi Gang wrote in an article in late September.
Central bank vice governor Pan Gongsheng said last month China would maintain prudent monetary policy and not resort to flood-like stimulus.
In July, the PBOC cut the reserve requirement ratio (RRR) for banks, releasing about 1 trillion yuan in long-term liquidity. Until recently, most analysts had expected another RRR cut this year, though some still hold out that possibility.
Broad M2 money supply grew 8.3% from a year earlier, above estimates of 8.1% forecast in the Reuters poll and edging up slightly from 8.2% in August.
SLOWING CREDIT GROWTH
Outstanding yuan loans grew 11.9% from a year earlier, the slowest pace since May 2002. Analyst had estimated growth of 12.1%, matching the pace in August.
Broader credit growth also continued to cool in September, with Capital Economics estimating it has slid to a 15-year low.
“As PBOC policy turns more supportive in response to strains in the property sector, we think credit growth will level off in the coming quarters. But the usual lags mean that tight credit conditions will remain a headwind to economic activity for a while,” it said in a research note.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.0% in September from a year earlier — the weakest pace since at least 2017 — and from 10.3% in August.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
In September, TSF fell to 2.9 trillion yuan from 2.96 trillion yuan in August. Analysts polled by Reuters had expected September TSF of 3.105 trillion yuan.
Local governments are quickening special bond issuance to spur infrastructure investment and support growth, which could help boost TSF in the coming months, analysts said. Data from the finance ministry showed local governments issued a net 1.84 trillion yuan ($285.6 billion) in special bonds in January-August, accounting for about half of the annual quota.
Source: Reuters (Reporting by Judy Hua and Kevin Yao; Editing by Jacqueline Wong and Kim Coghill)