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Banks in China grant fewer new yuan loans
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Banks in China lent less than expected in October as the central bank prioritizes managing risks and controlling inflation over boosting the economy.
New yuan lending totaled 506.1 billion yuan (US$83 billion) last month, up 700 million yuan from October last year, the People’s Bank of China said yesterday.
But the amount was below 787 billion yuan in September and fell short of analysts’ hopes for 600 billion yuan according to a Reuters survey.
Total social financing, the broadest measure of credit supply including loans, bank acceptance bills, corporate bonds and equity financing, fell by a third from a year earlier to 856.4 billion yuan.
M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 14.3 percent year on year to 107 trillion yuan at the end of October, the PBOC said.
Wang Yang, analyst with China Securities Co, said the tight liquidity last month may be due to slower-than-expected credit growth because the central bank may continue to adopt a relatively tight stance to rebalance the economy as earlier economic data pointed to a recovery in China’s economy.
Industrial profits grew 10.3 percent last month from a year ago, up 0.1 percentage point from September, according to the National Bureau of Statistics. October exports rose a better-than-expected 5.6 percent.
But inflationary pressure continued to build up as China’s October Consumer Price Index rose 3.2 percent — the fastest pace since February.
Before the inflation data, the central bank has warned in a report that “the foundation for price stability is not solid” and “upward pressure on prices still exists,” which indicates authorities will adopt a more hawkish policy stance, according to a latest report from Barclays.
Analysts believe the central bank will keep a steady stance while fine-tuning its policies to balance growth and reforms.
“Though we cautioned in mid-October that the government could scale back its pro-growth measures and the PBOC could prevent credit growth from quickening, we don’t think the PBOC will significantly tighten monetary policy as the new leaders still need a stable economic and financial environment,” Bank of America Merrill Lynch said in a research note.
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