Bank loans

New Chinese bank loans hit a record $3.13 trillion in 2021, despite falling in December

Yuan banknotes are seen in this illustrative photograph taken in Beijing July 26, 2010. REUTERS/Jason Lee

Join now for FREE unlimited access to Reuters.com

Register

  • New loans in December 1.13 trln yuan vs f’cast 1.25 trln yuan
  • Dec M2 money supply +9.0% y/y, vs. +8.7% f’cast
  • Dec TSF 2.37 trln yuan, vs f’cast 2.45 trln yuan
  • C.bank may opt for modest easing to support growth

BEIJING, Jan 12 (Reuters) – New bank lending in China fell more than expected in December from a month earlier, but lending for the whole of 2021 hit a record as the central bank slowly steps up its political support to cushion the economic downturn.

Chinese banks extended 1.13 trillion yuan ($177.56 billion) in new yuan loans in December, up from 1.27 trillion yuan in November and below analysts’ expectations, according to data released Wednesday by the Bank. People’s Republic of China (PBOC).

Analysts polled by Reuters had predicted new yuan lending would fall to 1.25 trillion yuan in December. The tally was also lower at 1.27 trillion yuan a year earlier.

Join now for FREE unlimited access to Reuters.com

Register

But new bank lending hit a record 19.95 trillion yuan for the year, up 1.6% from 19.63 trillion yuan in 2020 – the previous record – and equaled more than domestic product. UK crude.

“December credit data was slightly weaker than expected, but financing for the real economy has improved,” said Luo Yunfeng, an analyst at Merchants Securities.

China’s economy got off to a good start in 2021 as activity continued to rebound from a pandemic-induced slump the previous year, but has lost steam in recent months due to a market slowdown housing, reduced industrial pollution and stringent COVID-19 restrictions that have shaken consumer confidence and spending.

Efforts by policymakers to control debt risks have also had an impact on local government spending.

MORE SUPPORT MEASURES SEEN

To support sluggish growth, the central bank cut the reserve requirement ratio (RRR) for banks on Dec. 15, its second such measure in 2021, freeing up 1.2 trillion yuan of long-term liquidity to support growth. ‘commercial activity. Read more

The central bank also cut rates on its lending facility by 25 basis points (bps) to support the rural sector and small businesses. Read more

Most analysts expect further RRR cuts this year, with some also predicting modest policy rate cuts if activity continues to slow. More aggressive rate cuts are not expected, however, especially as the US Federal Reserve looks set to start raising rates soon, which could lead to capital outflows from emerging markets. Read more

Still, the housing downturn is set to continue into the first half of this year, with the recent local spread of the highly contagious variant of Omicron posing a new challenge.

China will continue to implement a proactive fiscal policy and prudent monetary policy in 2022. It will keep economic operations within a reasonable range in 2022, the Politburo, the country’s top policymaking body, said.

“The debt-to-GDP ratio was sharply reduced by 10% in 2021, but growth has slowed below policymakers’ comfort

area, policymakers have clearly shifted into outright easing mode,” Morgan Stanley analysts said in a note earlier this week.

Other China watchers said there were signs in the latest data that the slowing credit cycle could turn around.

M2 broad money supply rose 9.0% from a year earlier, central bank data showed, a nine-month high and above Reuters poll estimates of 8.7%. M2 increased by 8.5% in November compared to a year ago.

Outstanding yuan loans rose 11.6% in December from a year earlier – the smallest increase since May 2002 – compared with growth of 11.7% in November. Analysts had expected 11.7%.

But growth in the total stock of social finance (TSF), a large measure of credit and liquidity in the economy, accelerated to 10.3% in December from a year earlier and 10 .1% in November.

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.

“Broad credit growth resumed in December amid heightened policy support. We believe lending will continue to rebound in the months ahead, although officials are likely to prevent a sharp rise,” said Capital Economics in a note.

“Credit growth is likely to continue to pick up in the coming months given intensified efforts to reduce borrowing costs and boost lending. That said, policymakers still appear keen to balance their desire to ‘mitigate the economic downturn with their concerns about high debt levels.’

In December, the TSF fell to 2.37 trillion yuan from 2.61 trillion yuan in November. Analysts polled by Reuters expected 2.45 trillion yuan.

($1 = 6.3641 Chinese yuan renminbi)

Join now for FREE unlimited access to Reuters.com

Register

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

Our standards: The Thomson Reuters Trust Principles.