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December 15, 2016

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Chinese banks’ loans point to demand rising

BANKS in China lent more than expected in November, exceeding expectations, while total social financing grew by the most since March — latest sign that domestic demand was rebounding.

Banks extended new yuan loans of 794.6 billion yuan (US$115.07 billion) last month, up from 651.3 billion yuan in October, the People’s Bank of China said in a statement yesterday.

Economists’ expectations were for lending of 720 billion yuan, according to a Reuters poll.

Lending continued to be driven by consumer loans, primarily home mortgages, despite a series of measures rolled out by the authorities to cool surging home prices and avoid property bubbles.

Total social financing — the broadest measure of credit supply that includes loans, bank acceptance bills, corporate bonds and equity financing — hit an eight-month high of 1.74 trillion yuan, up from 896.3 billion yuan in October, with about half of the increase coming from shadow lending.

“Credit expansion has beaten expectations both on and off balance sheet,” said Liu Dongliang, a senior analyst with the assets management unit of China Merchants Bank. “This was in line with most economic indicators for November, signaling a rebound of demand in the real economy.”

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offers, loans from trust companies and bond sales.

Trust loans rose by 162.5 billion yuan in November, the biggest gain in nearly two years, while undiscounted bankers’ acceptances increased at the fastest pace since January.

Data showed that mid- and long-term household loans added 569.2 billion yuan last month, accounting for over two thirds of total new yuan lending.

M2, the broad measure of money supply, rose 11.4 percent from a year earlier, slower than the 11.6 percent growth in October, PBOC data showed.

Wen Bin, chief researcher at Minsheng Bank, blamed the slowdown to a high base and less inflow of capital.

He said liquidity has been tight recently and the central bank may pump more money into the system via open market operations to stabilize interest rates.

China’s central bank said recently that it will maintain ample liquidity in the economy while taking steps to prevent asset bubbles, adding that the balance between stabilizing growth and preventing bubbles has become more challenging.

The credit data echoed with manufacturing activities, foreign trade, domestic investment and retail sales in November that signaled a recovery in economic momentum.

China’s economy grew 6.7 percent in the third quarter and looks set to hit its full-year target, fuelled by government spending, a hot property market and credit that are adding to its growing pile of debt.


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