China’s new RMB loans in October appear to have fallen on weaker demand

  • RMB 800 billion in new loans in October, RMB 2.47 trillion in September
  • October money supply growth seen at 12.1% vs 12.0% y/y in September
  • TSF in October is 1.6 trillion yuan, September is 3.53 trillion yuan
  • Loans, money supply data from November 10th to 15th

BEIJING (Reuters) – China’s new yuan lending likely fell sharply in September and October, a Reuters poll showed. This is due to strict containment measures to stem the outbreak of the novel coronavirus disease (COVID-19) and the debt crisis in the real estate sector hurting economic activity and demand for credit.

Chinese banks issued an estimated 800 billion yuan ($110.4 billion) of net new yuan loans last month, up from 2.47 trillion in September, according to an estimated median survey of 27 economists. sharply decreased from the beginning.

This is below the 826.2 billion yuan issued in the same month last year.

“Policymakers continued to focus on providing credit support to manufacturing, with the PBOC providing net liquidity injections through its Pledged Supplementary Lending (PSL) in October,” Goldman Sachs analysts said. Overall credit demand may have remained subdued amid slower overall activity growth.” said in his research notes.

The People’s Bank of China lent 154.3 billion yuan to three policy banks through the PSL facility in October, according to central bank data.

China’s economy recovered at a faster pace than expected in the third quarter, but its growth prospects were hampered by lockdowns that hit factory and consumer activity and the resurgence of the COVID outbreak. Slumping home sales are also exacerbating liquidity pressures among indebted property developers.

Factory activity in China fell unexpectedly, and imports and exports also contracted in October, triggering the first simultaneous recession since May 2020.

The People’s Bank of China has pledged to maintain accommodative policies to support growth, but concerns over capital flight and a weaker yuan have limited room.

The central bank governor has pledged to maintain normal monetary policy and positive interest rates for as long as possible, predicting that China’s potential economic growth is likely to stay within a reasonable range.

China has failed to meet its annual growth target of around 5.5%, with the latest Reuters poll forecasting 3.2% growth in 2022.

Opinion polls show that outstanding yuan loans are expected to grow 11.2% year-on-year in October, unchanged from September. Broad M2 money supply growth in October was 12.0% for him compared to 12.1% for September.

China’s local governments issued net special bonds of 24.1 billion yuan in September, down from 51.6 billion yuan in August, according to the Ministry of Finance.

A slowdown in sovereign debt issuance could weigh on the overall social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF growth accelerated from 10.5% in August to 10.6% in September.

In October, TSF is expected to fall to 1.6 trillion yuan from 3.53 trillion yuan in September.

($1 = 7.2480 Chinese Yuan)

Edited by Jacqueline Wong

Our criteria: Thomson Reuters Trust Principles.

Leave a Comment