New Bank Lending in China

By Kevin Yao, Liz Lee
BEIJING (Reuters) – New bank lending in China rose less than expected in November, indicating weak credit demand as policymakers promise more stimulus measures.

Chinese banks extended 580 billion yuan ($79.72 billion) in new loans in November, which is an increase from October but falls short of analysts' expectations, as the central bank intensifies efforts to support the economy.

Analysts had predicted new loans would increase to 990 billion yuan, up from 500 billion yuan in October, compared to 1.09 trillion yuan a year earlier.

Capital Economics noted that with policymakers planning a larger budget deficit next year, strong government bond issuance will sustain credit growth, but a significant rise in private sector credit demand is not anticipated.

The People’s Bank of China (PBOC) calculated that new loans totaled 17.1 trillion yuan for the first 11 months of the year, down from 21.58 trillion yuan the previous year.

Household loans, including mortgages, increased to 270 billion yuan in November from 160 billion yuan in October, while corporate loans rose to 250 billion yuan from 130 billion yuan.

During the annual Central Economic Work Conference, China’s leaders pledged to increase the budget deficit, cut interest rates, and reduce banks’ reserve ratios to counteract the potential impact of expected U.S. trade tariffs.

The Politburo stated its commitment to an “appropriately loose” monetary policy.

Government advisers have suggested maintaining a 5% growth target next year despite the challenges faced by China’s economy, which has struggled amid U.S. tariffs disrupting growth.

In September, the central bank initiated significant monetary easing, with interest rate cuts and an injection of 1 trillion yuan into the economy. Recently, a $1.4 trillion debt package was launched to ease local government financial pressures and stimulate demand through tax incentives.

Maintaining a 5% growth rate next year may prove challenging as U.S. tariffs loom. Analysts expect the PBOC to further cut rates in subsequent years, which may lead to reductions in benchmark lending and mortgage rates.

Monetary Supply and Credit Growth
The M2 money supply grew 7.1% in November, below the anticipated 7.5%. In October, M2 growth was 7.5%. The narrower M1 money supply fell 3.7%, a moderation from 6.1% in October.

Outstanding yuan loans grew 7.7% in November, slightly below the expected 7.9% growth. The total social financing (TSF), a broad measure of credit and liquidity, grew 7.8%, maintaining a record low. TSF rose to 2.34 trillion yuan in November, lower than anticipated.

($1 = 7.2754 Chinese yuan renminbi)