China's central bank policy seen steady despite drop in loans
Yuan-denominated loans drop to 13-month low in October as corporate bond financing and foreign-currency loans record significant growth
Chinese banks extended fewer loans last month but analysts said the country's central bank is unlikely to further ease monetary policy further as new lending is expected to stabilise on the back of an economic recovery.
New yuan-denominated lending fell 81.6 billion yuan (HK$100.5 billion), or 13.9 per cent, to 505.2 billion yuan from a year ago, the People's Bank of China (PBOC) said on its website yesterday.
The new lending, which was the lowest in 13 months, missed the 590 billion yuan median estimate of 28 analysts surveyed by Bloomberg.
The loan figure does not reflect the actual credit environment as it did not include off-balance-sheet loans such as trust loans and government acceptance bills, said Wang Tao, an economist with UBS Securities. Foreign-currency loans and corporate bond financing, which were also excluded from new lending, saw significant growth in the month, she added.
Corporate bond financing increased by 82.5 per cent to 299.2 billion yuan in October from a year earlier, the bank's website shows. Trust loans rose by 135.5 billion yuan to 144.5 billion yuan in October from a year ago, and new foreign-currency lending amounted to the equivalent of 129 billion yuan in the month, an increase of 87.5 billion yuan.
Aggregate financing, which includes sources of funding such as trust loans and bond and stock issuance, was 1.29 trillion yuan in October, up 63 per cent, or 503.8 billion yuan, from a year ago, PBOC said.
The bank said the M2 measure of money supply - the amount of money in circulation - rose 14.1 per cent to 93.6 trillion yuan at the end of last month from a year ago, and outstanding yuan loans rose 15.9 per cent to 62 trillion yuan.
Liao Qiang, a Beijing-based analyst at global credit rating agency Standard & Poor's, said the total amount of credit remained high in October taking into account the significant growth in corporate bond issuance, which amounted to more than 200 billion yuan each month over the past few months.
He expects banks' new lending to remain stable for the rest of the year with the monthly amount to total about 500 billion yuan to 600 billion yuan this month and next.
Wang also expected the amount of new lending by the end of this year to stabilise at 500 billion yuan per month. "New lending is a leading indicator of the economy," she said, adding that the country's economy saw signs of recovery in September and October.
Full-year new lending is expected to reach eight trillion to 8.5 trillion yuan, Liao said. The People's Bank of China has set a new loan target of eight trillion yuan for this year, higher than the 7.47 trillion yuan last year.
Liao said the central bank is unlikely to introduce any measures to further relax monetary policy to boost lending despite the slowdown in new loans.
He does not expect major changes in monetary policy before March next year when the National People's Congress and the Chinese People's Political Consultative Conference are due to be held. "The new lending will remain steady by then."
JP Morgan said in a research note that the PBOC is unlikely to cut interest rates but will focus instead on injecting liquidity into the money market through open market operations.