China Sept new yuan loans surge to 1.22tn yuan

Kuwait Times - - BUSINESS -

BEIJING: Chi­nese banks ex­tended 1.22 tril­lion yuan ($181 bil­lion) in new loans in Septem­ber, well above ex­pec­ta­tions and cap­ping a record nine-month lend­ing spree de­spite grow­ing con­cerns about the risks from the coun­try’s bal­loon­ing debt. Much of the loan growth in re­cent months has been driven by a rapid rise in home mort­gages, as China’s siz­zling hous­ing mar­ket drives a buy­ing frenzy that au­thor­i­ties are now try­ing to clamp down on with­out trig­ger­ing a price col­lapse.

China’s credit growth has been “very fast” by global stan­dards, and with­out a com­pre­hen­sive strat­egy to tackle the debt over­hang there is a grow­ing risk it will have a bank­ing cri­sis or sharply slower growth or both, the In­ter­na­tional Mon­e­tary Fund said in a work­ing pa­per last week.

An­a­lysts polled by Reuters had ex­pected new lend­ing to in­crease mod­estly to 1 tril­lion yuan in Septem­ber, after more than dou­bling in Au­gust to 948.7 bil­lion yuan. Loans over the first nine months of the year were a record 10.16 tril­lion yuan ($1.51 tril­lion), ac­cord­ing to cen­tral bank data on Tuesday.

In Septem­ber alone, new hous­ing loans to in­di­vid­u­als to­talled 475.9 bil­lion yuan, some 76 per­cent higher than the same pe­riod last year, Ruan Jian­hong, a cen­tral bank of­fi­cial said in a news re­lease.

Per­sonal mort­gages ac­counted for 39 per­cent of all new lend­ing last month, based on Reuters cal­cu­la­tions us­ing cen­tral bank data.

CREDIT GROWTH

In a fur­ther sign that au­thor­i­ties are keep­ing the sys­tem awash with money to sup­port eco­nomic growth, broad M2 money sup­ply grew 11.5 per­cent in Septem­ber from a year ear­lier, slightly be­low fore­casts but up from Au­gust’s 11.4 per­cent rise. Out­stand­ing yuan loans grew 13 per­cent by end-Septem­ber on an an­nual ba­sis. Out­stand­ing loans had been fore­cast to rise 12.9 per­cent, while money sup­ply was seen up 11.6 per­cent.

China’s debt has soared to 250 per­cent of GDP and the Bank for In­ter­na­tional Set­tle­ments (BIS) warned in Septem­ber that a bank­ing cri­sis was loom­ing in the next three years. “Credit booms, even stealth mini ones, have a stair-step ef­fect on the credit-to-GDP ra­tio, which at 250 per­cent China can ill afford,” Tim Con­don, ING’s chief Asia econ­o­mist, wrote in a re­cent note.

How­ever, Con­don be­lieves the re­cent credit boom driven by lend­ing for gov­ern­ment debt swaps has al­ready peaked. For sim­i­lar rea­sons, Cap­i­tal Eco­nomics also be­lieves credit growth has been eas­ing in re­cent months, while ac­knowl­edg­ing that it re­mains rapid compared with a few years ago.

Strong lend­ing has also been driven by Beijing’s push to have lo­cal gov­ern­ments par­tic­i­pate in debt swaps, which are aimed at re­duc­ing their in­ter­est pay­ments and free­ing up more money for eco­nomic devel­op­ment at the mu­nic­i­pal level.

“It will take time for this more cau­tious pol­icy stance to im­pact eco­nomic growth,” said Cap­i­tal Eco­nomics’ China econ­o­mist Ju­lian Evans-Pritchard said in a note.

“In­deed, in com­ing months the econ­omy may con­tinue to propped up by ear­lier pol­icy eas­ing. How­ever, a slower ex­pan­sion in credit is likely to prove a ma­jor head­wind to growth next year.”

To­tal so­cial fi­nanc­ing (TSF), a broad mea­sure of credit and liq­uid­ity in the econ­omy, rose to 1.72 tril­lion yuan in Septem­ber from 1.47 tril­lion yuan in Au­gust. 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.

M1 money sup­ply, which in­cludes cash and short-term de­posits, rose 24.7 per­cent in Septem­ber from a year ear­lier, ver­sus Au­gust’s 25.3 per­cent rise. A widen­ing gap be­tween M1 and M2 growth has fu­elled con­cerns about a “liq­uid­ity trap” in the econ­omy where com­pa­nies re­main wary of in­vest­ing re­gard­less of how much stim­u­lus pol­i­cy­mak­ers pump into the sys­tem.

Cen­tral bank Gov­er­nor Zhou Xiaochuan said ear­lier this month that risks in China’s bank­ing sys­tem are con­trol­lable even as bad loans in­crease. But grow­ing risks of a prop­erty bub­ble have re­in­forced ex­pec­ta­tions that the cen­tral bank will be in no rush to ease pol­icy soon by cut­ting in­ter­est rates or banks’ re­serve re­quire­ments (RRR) fur­ther.

“Although we ex­pect eco­nomic growth to slow again in the fourth quar­ter, the (prop­erty) tight­en­ing mea­sures taken by lo­cal gov­ern­ments sug­gest that short­term pol­icy is now fo­cused on rein­ing-in the surge in home prices rather than boost­ing growth,” an­a­lysts at No­mura said in a note.

“Against this back­drop, room for the PBOC to fur­ther cut in­ter­est rates or the RRR this year is limited. As such, we re­move our call for one more in­ter­est rate cut and one more RRR cut through the rest of this year.” —Reuters

SANYA: In this pic­ture taken on Oc­to­ber 12, 2016, work­ers weld pieces of metal in a shop in Sanya. China’s growth slipped to a seven-year low of 6.6 per­cent in the third quar­ter, ac­cord­ing to an AFP sur­vey, de­spite am­ple stim­u­lus and a red-hot prop­erty mar­ket in the world’s sec­ond­largest econ­omy. —AFP

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