Bank loans

China Bank loans in September rise less than expected, broader credit growth slows

BEIJING: New bank lending in China accelerated in September from the previous month, but fell short of expectations as the central bank tried to support the sluggish economic recovery while keeping 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 down by power shortages, supply bottlenecks and clampdowns in sectors ranging from technology to real estate.

Chinese banks extended 1.66 trillion yuan ($257.69 billion) in new yuan loans in September, up from 1.22 trillion yuan in August, data from the People’s Bank of China (PBOC) showed on Wednesday.

Analysts polled by Reuters had predicted new yuan lending would rise to 1.85 trillion yuan in September. The tally was also lower than 1.9 trillion yuan a year earlier.

Household loans, mainly mortgage loans, reached 788.6 billion yuan in September from 575.5 billion yuan in August, while corporate loans reached 980.3 billion yuan from 696.3 billion. yuan, according to central bank data.

“Against the backdrop of tight ownership and debt controls on local government finance vehicles, the market should not have too high expectations (on credit),” said Luo Yunong, an analyst at Industrial Securities.

“The key is to see when funding for household mortgages and home loans will be eased, and how strong fiscal policy is to offset the economic slowdown.”

The PBOC is expected to keep the bank’s reserve requirement ratio (RRR) unchanged in the fourth quarter, before cutting another 50 basis points in the first quarter of 2022, according to the latest Reuters poll.

China will maintain normal monetary policy for as long as possible, and its potential economic growth rate is still expected to stay within the 5% to 6% range, PBOC Governor Yi Gang wrote in a post in late September.

Central Bank Deputy Governor Pan Gongsheng said last month that 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, freeing up about 1 trillion yuan of long-term liquidity. Until recently, most analysts were expecting another RRR reduction this year, although some are holding out on that possibility.

M2 broad money supply rose 8.3% from a year earlier, above Reuters poll estimates of 8.1% and up slightly from 8.2% in August.

SLOWING CREDIT GROWTH

Outstanding yuan loans rose 11.9% from a year earlier, the slowest pace since May 2002. The analyst had estimated growth at 12.1%, matching the August pace .

Broader credit growth also continued to slow in September, with Capital Economics estimating it fell to its lowest level in 15 years.

“As PBOC policy becomes more supportive in response to tensions in the real estate sector, we expect credit growth to stabilize over the coming quarters. But typical lags mean tight credit conditions will remain a drag. economic activity for some time,” says a research note.

Growth in the total stock of social finance (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.0% in September from a year earlier – the slowest pace since at least 2017 – and at 10.3% in August.

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

In September, the TSF fell to 2.9 trillion yuan from 2.96 trillion yuan in August. Analysts polled by Reuters had expected a September TSF of 3.105 billion yuan.

Local governments are accelerating the issuance of special bonds to spur infrastructure investment and support growth, which could help boost the TSF in the coming months, analysts said.

Data from the Ministry of Finance showed local governments issued a net amount of 1.84 trillion yuan ($285.6 billion) in special bonds in January-August, about half of the annual quota.

(1 USD = 6.4419 Chinese Yuan)

(Editing by Jacqueline Wong and Kim Coghill)