China October bank lending seen declining despite policy measures: Reuters poll

BEIJING: China’s new yuan loans are expected to fall sharply in October from September, a Reuters poll showed on Friday (Nov 8), signalling weak credit demand even as the central bank ramps up policy stimulus to buttress the economy.
Banks likely issued 700 billion yuan (US$97.86 billion) in net new yuan loans last month, the median of 19 economist estimates showed, down from September’s 1.59 trillion yuan.
That was also lower than the 738.4 billion yuan issued in the same month a year earlier.
In late September, China’s central bank unveiled an aggressive stimulus package including rate cuts and Chinese leaders pledged “necessary fiscal spending” to bring the economy back on track to meet a growth target of about 5 per cent.
Analysts expect credit demand to stay weak in October even as the central bank steps up policy stimulus, although they believe there could be some improvements in business sentiment.
“Mortgage repricing happened only at end-October, and household long-term loans may not really stage a rebound,” analysts at Citi said in a note. “Corporate credit demand could stay soft, with bill discount rate trending lower during October.”
Banks doled out 16.02 trillion yuan in new loans in the first nine months of the year, versus 19.75 trillion yuan a year earlier.
China’s economy has lost momentum since the second quarter, but policymakers have been working to arrest further weakness from a prolonged property market downturn and swelling local government debt.
Chinese lawmakers are reviewing a cabinet bill this week that would raise ceilings on local government debt to replace existing hidden debt at a week-long meeting by the standing committee of China’s top legislature. The package is expected to be announced later on Friday.
That follows Minister of Finance Lan Foan’s announcement last month that China would “significantly increase” government debt and support consumers and the property sector. There were no details of the scale or timing of the fiscal measures.
Reuters reported last week that China is considering approving new debt issuance of more than 10 trillion yuan to tackle hidden local government debt and fund buybacks of idle land and reduce a giant inventory of unsold flats, citing sources with knowledge of the matter.
The approval is expected to be announced on Friday.
However, China watchers expect more of the fresh funds will be aimed at reducing local government debt, and not produce a near-term boost in economic activity.
The sources had said that US Republican candidate Donald Trump’s winning the presidential election this could prompt a stronger fiscal package in expectations of more economic headwinds for China.
Trump recaptured the White House with a sweeping victory over Democrat Kamala Harris in Tuesday’s election, posing for China threats of US tariffs that could return them to the days of a trade war years ago.
Outstanding yuan loans likely rose 8.1 per cent in October from a year earlier, the poll showed, the same as the pace in September.
Broad M2 money supply growth in October was seen at 6.9 per cent, picking up from 6.8 per cent in September.
Acceleration in government bond issuance could help boost growth in total social financing (TSF), a broad measure of credit and liquidity in the economy that includes off-balance sheet forms of financing, which slowed to a record low of 8.0 per cent in September from 8.1 per cent in August.
TSF in October likely fell 1.55 trillion yuan from 3.76 trillion yuan in September, the poll showed.