Credit crackdown seen as limiting China's growth

New credit on the mainland probably fell by a record in the second half of last year amid a crackdown on speculative lending, limiting prospects for economic expansion this year as policymakers focus on controlling financial risks.

The broadest measure, aggregate financing, was 7.1 trillion yuan (HK$9 trillion) based on published figures plus economists' median estimate for December data due in coming days. That would be about 931 billion yuan less than in July to December in 2012, the largest drop in figures going back to 2002.

Beijing is set to be tested in its willingness to sacrifice economic growth to tame a record debt build-up that has evoked comparisons to Japan before its lost decade. Money-market cash crunches in June and December highlighted President Xi Jinping's efforts to rein in borrowing after a US$1.7 trillion first-half increase in aggregate financing.

"Their focus is more about containing debt growth," said Yao Wei, China economist at Societe Generale. "Sometime over the course of 2014 they will realise the slowdown, the deceleration, is worse than expected and they will loosen their stance a little bit."

The mainland economy probably grew 7.6 per cent last year, the State Council said last month. That would tie 1999's pace as the lowest since 1990 and be just above the 7.5 per cent growth goal for the year. Analysts surveyed last month see a 7.4 per cent expansion this year.

Estimates for December's aggregate financing from 13 economists range from 1.04 trillion yuan to 1.5 trillion yuan, with a median of 1.15 trillion yuan, and compare with 1.63 trillion yuan a year earlier.