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January 13, 2017

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Firms fuel rise in new yuan loans

BANKS in China lent more than expected in December, with analysts saying that this signaled a recovery in corporate demand.

New yuan loans stood at 1.04 trillion yuan (US$151 billion) in December, 446.6 billion yuan more than a year earlier, the People’s Bank of China said in a statement yesterday.

The figure also exceeded market expectations of 676.8 billion yuan, according to a Bloomberg News poll.

New yuan-denominated loans for the whole year amounted to a record high of 12.65 trillion yuan, 925.7 billion yuan more than in 2015.

Total social financing, the broadest measure of credit supply that includes loans, bank acceptance bills, corporate bonds and equity financing, reached 17.8 trillion yuan last year, up 2.4 trillion yuan from 2015.

Liu Dongliang, senior analyst at China Merchants Bank, said the rise in loans and total new credit pointed to corporate expansion and economic recovery.

“Rapid loan expansion in December and the subsequent fast growth in total social financing will in general help support economic sustainability,” Liu said.

“But it is still too early to be excessively optimistic about the data. It is important to see whether the real demand for loans can last under economic stabilization. We think the demand can at least last into the first quarter,” Liu said.

But the Australia and New Zealand Banking Group warned in a note yesterday that the authorities may tighten regulations this year to slow credit expansion to prevent risks.

“The rapid loan growth is contrary to the authorities’ inclination to deleverage and may exert upward pressure on asset prices,” the note said.

“As preventing financial risk is a top priority, the regulators may act further to strengthen regulations over the shadow banking sector and asset management activities to prevent funds from flowing into the asset markets.”

M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 11.3 percent year on year to 155.01 trillion yuan at the end of December.


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