China Oc­to­ber new yuan loans hit one-year low as debt curbs weigh

The Gulf Today - Business - - INTERNATIONAL -

BEI­JING: China’s new loans fell more than ex­pected in Oc­to­ber to their low­est in a year as banks tight­ened mort­gage lend­ing and cor­po­rates con­tin­ued to shun bank loans, amid a con­tin­u­ing clam­p­down on risky shadow lend­ing ac­tiv­i­ties.

Chi­nese au­thor­i­ties are walk­ing a fine line by con­tain­ing riskier types of fi­nanc­ing and slow­ing an ex­plo­sive build-up in debt with­out stunt­ing eco­nomic growth.

Chi­nese banks ex­tended 663.2 bil­lion yuan ($99.83 bil­lion) in net new yuan loans in Oc­to­ber, data from the cen­tral bank showed on Mon­day, fall­ing to the low­est since Oc­to­ber last year.

An­a­lysts polled by Reuters had pre­dicted new yuan loans to drop to 780 bil­lion yuan, from Septem­ber’s 1.27 tril­lion yuan.

House­hold loans, mostly mort­gages, fell to 450.1 bil­lion yuan in Oc­to­ber from 734.9 bil­lion yuan in Septem­ber, ac­cord­ing to Reuters cal­cu­la­tions based on the cen­tral bank’s data.

House­hold loans ac­counted for 68 per cent of to­tal new loans last month, up from 58 per cent in Septem­ber.

Cor­po­rate loans dropped to 214.2 bil­lion yuan in Oc­to­ber from 463.5 bil­lion yuan a month ear­lier.

Broad M2 money sup­ply (M2) grew 8.8 per cent in Oc­to­ber from a year ear­lier, miss­ing fore­casts for an ex­pan­sion of 9.2 per cent and hit­ting the slow­est since records be­gan in 1996. China’s cen­tral bank in June said that the slow­ing M2 growth could be a “new nor­mal” due to reg­u­la­tors’ stepped-up crack­down on risky shadow lend­ing ac­tiv­i­ties.

OUT­STAND­ING LOANS

Out­stand­ing yuan loans at the end of Oc­to­ber grew 13 per cent from a year ear­lier, less than an ex­pected 13.1 per cent rise.

China’s banks ex­tended a record 12.65 tril­lion yuan in loans in 2016 as the gov­ern­ment en­cour­aged credit-fu­eled stim­u­lus to meet its eco­nomic growth tar­get.

The credit ex­plo­sion has stoked wor­ries about fi­nan­cial risks from a rapid build-up in debt, which au­thor­i­ties have pledged to con­tain this year. China’s to­tal so­cial fi­nanc­ing (TSF), a broad mea­sure of credit and liq­uid­ity in the econ­omy, fell to 1.04 tril­lion yuan ($156.54 bil­lion) last month from 1.82 tril­lion yuan in Septem­ber, ac­cord­ing to the cen­tral bank data.

Gold­man Sachs had ex­pected China’s TSF, which in­cludes off­bal­ance sheet forms of fi­nanc­ing such as loans from trust com­pa­nies, bond sales and ini­tial pub­lic of­fer­ings, to shrink to 1.2 tril­lion yuan in Oc­to­ber.

China’s broad shadow bank­ing ac­tiv­ity stopped grow­ing in the first half of 2017 and de­clined rel­a­tive to gross do­mes­tic prod­uct for the first time in five years, weighed by a fall in is­suance of higher risk in­stru­ments, a Moody’s In­vestors Ser­vice re­port showed, in­di­cat­ing China’s re­cent reg­u­la­tory mea­sures are show­ing ef­fect.

Au­thor­i­ties have turned their at­ten­tion to con­sumer loans, in a bid to stop them from be­ing used to fi­nance hous­ing pur­chases. A cen­tral re­port last month showed much of the growth in con­sumer credit ap­pears linked to the prop­erty mar­ket.

Out­stand­ing house­hold con­sumer loans surged nearly 30 per cent as of end-septem­ber from a year ear­lier and there was also a sharp in­crease in prop­erty loans in the same pe­riod.

Mean­while the China took what it called a ma­jor step to­ward open­ing its fi­nan­cial in­dus­try with a prom­ise Fri­day to ease lim­its on for­eign own­er­ship of banks and se­cu­ri­ties firms fol­low­ing a visit by US Pres­i­dent Don­ald Trump that was dom­i­nated by trade is­sues.

The an­nounce­ment by a Cab­i­net of­fi­cial ap­peared to re­spond to mount­ing US and Euro­pean com­plaints that Bei­jing ham­pers for­eign ac­tiv­ity in a va­ri­ety of in­dus­tries in vi­o­la­tion of free-trade com­mit­ments. The Amer­i­can Cham­ber of Com­merce in China, which has ap­pealed to Bei­jing to ease mar­ket bar­ri­ers, said it looked for­ward to see­ing de­tails of the lat­est changes.

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