November lending surge caps China’s record credit year

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A shopping mall under construction in Chongqing, China. Photo: Reuters / Stringer

China’s total new loans tally this year has now risen to 12.94 trillion yuan, more than the record total 12.65 trillion yuan over all of last year, with one month to spare, Reuters reports.

The total was given a boost by November lending worth 1.12 trillion yuan, well exceeding forecasts of 800 billion yuan.

The larger-than-expected number was due to strong corporate financing demand, as well as a sharp rise in household loans, Caitong Fund Management analyst Zheng Lianghai said. Analysts also pointed to an increase in formal loans as banks move off-balance sheet loans out of the shadows amid ongoing reform efforts. Additionally, a recent rout in China’s bond markets has made it more difficult to raise money by issuing bonds.

Economist Fielding Chen writes for Bloomberg Intelligence on Tuesday that the sharp rise in November was seasonal, with M2 money supply growth remaining historically low as financial sector deleveraging takes its course.

Chen adds that policy makers are unlikely to take drastic measures to curb lending:

Early indicators have pointed to strong momentum in the economy and weaker inflation pressures — strong growth provides leeway for regulators to continue to push ahead on deleveraging, while slower inflation suggests there’s little urgency for the People’s Bank of China to tighten. Bloomberg Economics’ view is the PBOC is likely to use macro-prudential and regulatory tools rather than tighter monetary policy to encourage deleveraging. The data suggest bolder efforts are needed to rein in credit growth. Even so, BE’s view is policy makers are unwilling to take a major hit on growth.

Seasonality was a big factor in the rise in total social financing — China’s broadest measure of new lending and equity issuance — in November, which came in at 1.6 trillion yuan, versus estimates of 1.24 trillion. Looking at the growth of stock of credit, he points out, there is slightly slower growth than the previous month. The stock of total social financing net of equity issuance was up 12.1% year on year, versus a 12.4% rise in October.

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