Bank loans

China Oct, new bank loans fall less than expected, mortgages rise

BEIJING: New bank lending to China fell sharply in October compared to the previous month, but not as bad as expected by analysts who expect the central bank to cautiously ease monetary policy amid the risks of stagflation.

Data released by the People’s Bank of China on Wednesday showed that banks made new loans of 826.2 billion yuan ($ 129.27 billion) in October, down sharply from September’s 1.66 billion. , but better than the 800 billion expected in a Reuters poll of analysts.

The new loans were over 689.8 billion yuan a year earlier.

“There are signs that PBOC policy is becoming more favorable in response to tensions in the real estate industry. As such, we believe this could be the trough in credit growth,” Capital Economics said in a statement. note.

“But the usual lags mean tight credit conditions will remain a barrier to economic activity for some time.”

The outstanding amount of yuan loans increased by 11.9% from the previous year, in line with expectations and at the lowest since May 2002.

Central bank governor Yi Gang said last month that China’s money supply and total social finance growth was broadly in line with nominal GDP growth, and liquidity was plentiful.

The PBOC is likely to act with caution on easing monetary policy to support the economy, as slowing economic growth and surging factory inflation fuel concerns about stagflation, sources said. politicians and analysts.

RECOVERY OF MORTGAGES

Wen Bin, senior economist at Minsheng Bank, said he expected the central bank to rely on targeted, short-term policy tools to support small businesses and some other sectors.

On Monday, the PBOC announced that it will provide low-cost loans to financial institutions to help companies reduce their carbon emissions, thereby supporting China’s long-term carbon neutrality goals.

Goldman Sachs analysts have estimated that the PBOC could provide financial support of around 1.2 trillion yuan in the coming year.

Loans to households, mainly mortgages, fell to 464.7 billion yuan in October from 788.6 billion yuan in September, while loans to businesses fell to 310.1 billion yuan from 980.3 billion yuan, according to central bank data.

“Medium- and long-term household loans have overtaken medium- and long-term business loans, indicating that the pace of home loan issuance is accelerating,” said Zhou Hao, senior economist at Commerzbank.

New mortgages reached 348.1 billion yuan in October, up 101.3 billion yuan from September, the central bank said.

Growth in total social finance outstanding (TSF), a broad measure of credit and liquidity in the economy, stood at 10.0% in October, unchanged from September.

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

In October, the TSF fell to 1.59 trillion yuan, from 2.9 trillion yuan in September. Analysts polled by Reuters had expected an October TSF of 1.6 trillion yuan.

The broad M2 money supply rose 8.7% from a year earlier, according to central bank data, above the Reuters poll forecast of 8.3%. M2 increased 8.3% in September.

Inflation at China’s factories hit a 26-year high in October as coal prices soared amid an electricity crisis in the industrial core, further squeezing profit margins producers and exacerbating fears of stagflation.

(Reporting by Judy Hua and Kevin Yao; Editing by Simon Cameron-Moore and Alison Williams)