China’s October new yuan loans decline as demand weakens

  • New loans in October at 800 billion yuan compared to 2.47 trillion yuan in September
  • Money supply growth in October at 12.0% over one year compared to 12.1% in September
  • October TSF seen at 1.6 trln yuan vs. 3.53 trln yuan in September
  • Loans, money supply data due November 10-15

BEIJING, Nov 9 (Reuters) – China’s new yuan lending likely fell in October from September, a Reuters poll shows, as tight restrictions to stamp out COVID-19 outbreaks and a debt crisis in the real estate sector have hurt economic activity and credit demand.

Chinese banks are estimated to have issued 800 billion yuan ($110.4 billion) in net new yuan loans last month, down sharply from 2.47 trillion yuan in September, according to the median estimate of the survey of 27 economists.

That would be lower than the 826.2 billion yuan issued the same month a year earlier.

“While policymakers continued to focus on lending support to the manufacturing sector, and the PBOC also injected net liquidity via the pledged supplementary loan (PSL) in October, overall credit demand may have remained sluggish. amid weaker overall business growth,” Goldman Sachs analysts said. said in a research note.

In October, the People’s Bank of China extended 154.3 billion yuan in loans to three strategic banks through its PSL facility, according to central bank data.

China’s economy rebounded faster than expected in the third quarter, but its growth prospects have been hampered by a recurrence of COVID outbreaks, with shutdowns affecting factory and consumer activity. The slump in home sales has also deepened the cash crunch among indebted property developers.

Chinese factory activity fell unexpectedly while its exports and imports also contracted in October, the first simultaneous recession since May 2020.

The People’s Bank of China has pledged to maintain an accommodative policy to support growth, but it faces limited room to maneuver due to concerns about capital flight and a weaker yuan.

The central bank governor pledged to maintain normal monetary policy and positive interest rates for as long as possible, expecting China’s potential economic growth to remain within a reasonable range.

China is on course to miss its annual growth target of around 5.5% – the latest Reuters poll predicts 3.2% growth for 2022.

Outstanding yuan loans are expected to rise 11.2 percent in October from a year earlier, unchanged from September, according to the survey. Growth in broad M2 money supply in October was 12.0%, compared to 12.1% in September.

Chinese local governments issued a net amount of 24.1 billion yuan of special bonds in September, the finance ministry said, compared with 51.6 billion yuan in August.

Any slowdown in government bond issuance could weigh on total social finance (TSF), a large measure of credit and liquidity. Growth in TSF outstandings accelerated to 10.6% in September against 10.5% in August.

In October, the TSF is expected to fall to 1.6 trillion yuan from 3.53 trillion yuan in September.

($1 = 7.2480 Chinese Yuan)

Editing by Jacqueline Wong

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