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