Growth in new loans better than expected

PUBLISHED : Thursday, 15 December, 2011, 12:00am
UPDATED : Thursday, 15 December, 2011, 12:00am


New lending by banks on the mainland grew faster than expected last month, indicating policy fine-tuning by Beijing is under way to counter an economic slowdown.

Mainland banks extended 562.2 billion yuan (HK$689.99 billion) in new local currency loans in November, the People's Bank of China said yesterday.

Although the figure was lower than the 587 billion yuan of new loans in October, it was higher than the 550 billion yuan in lending forecast by economists for November.

'Note that usually November and December is a slow season for new loans, so this reading is actually quite strong,' said Lu Ting, an economist at Bank of America-Merrill Lynch. 'Beijing has started fine-tuning its policies since early October, and credit supply has been truly improved.'

Policymakers put 'maintaining growth' ahead of 'taming inflation' when listing the government's goals for 2012 in a statement after the Central Economic Work Conference concluded yesterday, a difference in emphasis that is generating expectations that policies would be more pro-growth next year.

Barclays Capital forecasts new loans at 7.5 trillion to 8 trillion yuan in 2012, compared with an estimated 7.5 trillion yuan this year, while it put M2 growth at 14 per cent next year.

In the first 11 months of this year, banks extended 6.83 billion yuan in new loans.

In November, M1 money supply growth fell from 8.4 per cent in October to 7.8 per cent, while M2 growth slowed from 12.9 per cent in October to 12.7 per cent, suggesting possible capital outflows.

Liao Qun, CITIC Bank International chief economist, said he expected new loans to reach 8 trillion yuan to 8.5 trillion yuan in 2012.

'Provided that the euro zone withstands the crisis, China would not need drastic measures like another stimulus package. The central bank is likely to cut the reserve requirement ratio three to four times next year.'

Liu Ligang, head of China economics at ANZ Bank, said he expected China to cut its reserve requirement ratio three to four times starting from December.