Ex­plo­sive bank loan rise may spark tight­en­ing of credit

China Daily (Hong Kong) - - BUSINESS DIGEST - By GAO CHANGXIN in Shang­hai gaochangxin@chi­nadaily.com.cn 1,062.5

The Chi­nese cen­tral bank said Wed­nes­day that new yuan loans grew more than ex­pected in Novem­ber, as its lead­ers met in Bei­jing to dis­cuss poli­cies, in­clud­ing growth tar­gets, for next year.

Chi­nese banks ex­tended 624.6 bil­lion yuan ($103 bil­lion) of new yuan loans in Novem­ber, al­most 24 per­cent higher than the 506.1 bil­lion lent in Oc­to­ber. The fig­ure topped both the 550 bil­lion yuan me­dian fore­cast in a poll of 11 econ­o­mists by The Wall Street Jour­nal and the 580 bil­lion yuan me­dian es­ti­mate of 41 an­a­lysts sur­veyed by Bloomberg.

Ag­gre­gate fi­nanc­ing came to 1.23 tril­lion yuan, up from 856.4 bil­lion yuan in Oc­to­ber.

M2, a broad mea­sure of money sup­ply, grew 14.2 per­cent year-on-year, 0.1 per­cent­age points higher than the mar­ket con­sen­sus.

The bench­mark Shang­hai Com­pos­ite In­dex lost 1.5 per­cent on Wed­nes­day. The cen­tral bank re­leased the data af­ter mar­kets closed.

Zhou Hao, a China econ­o­mist with Aus­tralia and New Zealand Bank­ing Group Ltd, be­lieves a re­vival in shadow bank­ing shored up so­cial fi­nanc­ing.

He pointed to a rise in en­trusted loans — a type of off-bal­ance-sheet lend­ing in which lenders act as in­ter­me­di­aries — as proof of an in­crease in shadow bank­ing.

New en­trusted loans to­taled 270.4 bil­lion yuan in Novem­ber, an in­crease of 148.6 bil­lion yuan over the same pe­riod last year and the high­est monthly fig­ure since Au­gust.

Un­claimed bankers’ ac­cep­tances, another chan­nel for off-bal­ance-sheet lend­ing, grew by 5.7 bil­lion yuan in Novem­ber, 54.6 bil­lion more than the same pe­riod last year.

“In­creases in the two ar­eas show that lenders are find­ing ways to lend more against the cen­tral bank’s will to con­trol loan growth,” said Zhou.

Bei­jing has been try­ing to delever­age a Chi­nese econ­omy that has be­come in­creas­ingly in­sen­si­tive to in­vest­ments on the back of decades of rapid growth.

The stock of debt surged to 200 per­cent of GDP at the end of 2012, up from 129 per­cent


in 2008, when au­thor­i­ties stim­u­lated the econ­omy with a 4 tril­lion yuan in­vest­ment pack­age to fight the global fi­nan­cial cri­sis.

The faster- than- ex­pected loan growth might trig­ger cen­tral bank of­fi­cials to get tougher on re­strain­ing debt as they meet in Bei­jing this week to map out poli­cies for 2014, an­a­lysts said.

“The ‘pru­dent’ mone­tary pol­icy stance will likely be kept, but tight­en­ing has al­ready started,” wrote Bri­tish bank Bar­clays Plc in a re­search note on Wed­nes­day, com­ment­ing on the meet­ing.

Bar­clay ex­pects the M2 growth tar­get to be kept at 13 per­cent in 2014, com­pared with the ac­tual growth of more than 14 per­cent yearto-date. And that may trans­late to tighter liq­uid­ity.

Growth tar­gets likely will be main­tained at 7.5 per­cent in 2014, as main­tain­ing rather than chang­ing those tar­gets should help sta­bi­lize mar­ket sen­ti­ment as the gov­ern­ment shifts its fo­cus from cre­at­ing growth to pro­mot­ing re­forms, the bank added.

Also on Wed­nes­day, the Min­istry of Fi­nance said the gov­ern­ment’s fis­cal in­come grew 15.9 per­cent in the first 11 months of the year, to 912.5 bil­lion yuan.

A front- page com­men­tary by China Se­cu­ri­ties Jour­nal, owned by Xin­hua News Agency, said that China should phase out its “proac­tive” fis­cal pol­icy, as it causes large deficits and jeop­ar­dizes lo­cal gov­ern­ment debt.

Fis­cal rev­enue growth has slowed from 32 per­cent in 2007 to 13 per­cent in 2012, while an­a­lysts be­lieve out­stand­ing lo­cal gov­ern­ment debt has risen to 15 to 20 tril­lion yuan.

Bar­clay ex­pects a “proac­tive” fis­cal pol­icy stance also is likely to be re­tained.

“In our view, the fis­cal pol­icy stance of the past two years can be de­scribed as be­ing pru­dent, as the gov­ern­ment stepped up ef­forts to sup­port the econ­omy only when growth slowed to ap­proach the 7 per­cent bot­tom line,” the bank wrote.

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