China November new bank loans hit 1.21 trillion yuan, below the forecast

Chinese banks extended 1.21 trillion yuan ($173.48 billion) in new yuan loans in November, nearly double October’s 615.2 billion.

Analysts polled by Reuters had forecast new yuan loans to reach 1.35 trillion yuan in November.

In November last year, new loans were 1.27 trillion yuan.

“New lending in October was weaker than expected due to the impact of the COVID outbreak,” said Zhou Guannan, an analyst at Huachuang Securities.

Loans to households, including mortgages, rose to 262.7 billion yuan in November from a decline of 18 billion yuan in October. Corporate loans rose to 883.7 billion yuan from 462.2 billion yuan in October.

New loans totaled 19.91 trillion yuan in January-November, according to central bank data, from a record 19.95 trillion yuan in 2021.

The central bank will focus on supporting the slowing economy, PBOC Governor Yi Gang said earlier this month, adding that domestic consumer inflation is expected to remain subdued in 2023.

The central bank cut banks’ reserve requirements by 25 basis points (bp) effective Dec. 5, freeing up about 500 billion yuan in long-term liquidity to support a faltering economy.

“The COVID-19 outbreak and unstable expectations have created continuous disruptions in credit extension,” said Wen Bin, chief economist at China Minsheng Bank.

“We must accelerate the policy to consolidate the basis of economic stability and promote the steady expansion of bank loans and overall social financing.”

TARGET SUPPORT

The PBOC is likely to increase targeted support for struggling sectors through its structural tools, according to policy sources and analysts.

In 2023, the government will focus on stabilizing growth, employment and prices while preventing and mitigating major systemic risks, the Politburo, the country’s top decision-making body, said last week.

Last week, China announced it was rolling back key elements of its anti-COVID regime. It has also taken steps to ease the financing crunch for property developers in a bid to stabilize the sector.

But economists say the road to recovery could be long and bumpy, especially if new infections rise and global demand continues to weaken.

China’s economy grew by just 3% in the first three quarters of this year, and full-year expansion is expected to be around 3%, well below the official target: around 5.5.

Broad M2 money rose 12.4% from a year earlier, according to central bank data, higher than the 11.7% predicted by the Reuters poll. In October, M2 increased by 11.8% compared to the previous year.

Yuan loans outstanding rose 11.0% in November from a year earlier, compared with growth of 11.1% in October. Analysts had predicted growth of 11.1 per cent.

Growth in the stock of total social financing (TSF), a broad measure of credit and liquidity in the economy, fell to 10.0% in November from a year earlier and 10.3% in October.

FST includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as IPOs, trust company loans and bond sales.

In November, TSF rose to 1.99 trillion yuan from 907.9 billion yuan in October. Analysts polled by Reuters had expected a FAT of 2.10 trillion yuan in November.

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