China sees slower growth in new loans and money supply in December

PUBLISHED : Wednesday, 15 January, 2014, 11:10am
UPDATED : Thursday, 16 January, 2014, 1:40am

Mainland banks' new lending came in weaker than expected last month while broad money supply also grew at a slower rate, but analysts say the central bank will continue its tight monetary policy this year to contain credit growth.

New loans advanced by banks dropped to 482.5 billion yuan (HK$618.8 billion) from 624.6 billion yuan in November, according to data released by the People's Bank of China yesterday.

The figure fell short of market consensus it would reach 570 billion yuan.

Outstanding loans of mainland banks increased 14.1 per cent to 8.9 trillion yuan for the year.

Raymond Yeung Yu-ting, a senior economist at ANZ Banking, said credit growth remained robust as could be seen from the social financing aggregate, which increased 18.8 per cent to 1.23 trillion yuan last month.

"I think the central bank will continue its tight monetary policy this year if the country's economic growth target is set at 7.5 per cent," Yeung said.

"The central bank's credit control targets were basically met last year," said Sheng Songcheng, the head of the statistics division of the central bank.

Sheng also said the central bank would maintain and fine-tune its prudent monetary policy when necessary in an effort to keep credit growth at a reasonable pace.

The broadest measure of money supply, M2, rose to 110.7 trillion yuan at the end of last month, an increase of 13.6 per cent when compared with year-ago data although it missed market estimates it would be 13.8 per cent higher.

In November, the figure rose 14.2 per cent.

Of the social financing aggregate, off-balance sheet financing accounted for 29.9 per cent, amounting to 5.17 trillion yuan, Sheng said, adding industry concerns prompted the central bank to strengthen supervision and launch studies over the shadow banking sector.

The slowdown in credit and M2 growth last month largely reflected seasonal factors as banks needed to hold more cash to meet year-end regulatory requirements, HSBC's economists Qu Hongbin and Sun Junwei said in a report.

The central bank would keep the current monetary policy stance in place, maintaining a 13 per cent M2 growth target which in turn would be able to support an economic growth rate of about 7.5 per cent, they said.

Zhu Haibin, the chief China economist with JP Morgan, expects the mainland's M2 growth would slow to 13.1 per cent this year, and new loans would also grow at a slower pace of 13.6 per cent.

The central bank would keep policy rates and the reserve requirement ratios on hold this year, maintaining its credit tapering, Zhu said.

In addition, the mainland's foreign exchange reserves increased US$157.3 billion in the fourth quarter to US$3.82 trillion at the end of last year.

Yeung said sizeable capital inflows would put pressure on the appreciation of the yuan.