Slowing investment growth curbs China loan demand

Mainland credit growth eased last month, a sign of persistent weakness in demand from the real economy as investment growth slowed further.

Some economists urged policymakers to adopt more broad-based easing, such as lowering banks' reserve requirement ratios, to help lower funding costs for sectors hit hard by an economic downturn.

New loans totalled 548.3 billion yuan (HK$694 billion) last month, below market expectations of 626 billion yuan and also less than the 857.2 billion yuan extended in September, People's Bank of China data showed.

The weaker lending came even after the central bank said in its quarterly monetary policy report it had injected 769.5 billion yuan into some banks over the past two months to boost short-term liquidity.

"Loan demand has remained curbed by slowing investment growth," said Peng Xingyun, the head of the monetary theory and policy bureau under the Chinese Academy of Social Sciences. "Banks are also not so keen to offer short-term loans due to concern about financial risks."

Peng said Beijing ought to pursue more effective tools to lower funding costs, rather than relying on targeted easing to adjust short-term liquidity.

He said one option was to make a broad-based cut in reserve requirement ratios - now at a historic high of 20 per cent for large banks.