China Oct new bank loans fall less than expected on stagflation concern

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BEIJING (Businesshala) – New bank loans in China fell sharply in October compared with the previous month, but not as badly as forecast by analysts who urged the central bank to cautiously ease monetary policy due to inflationary risks. expect.

FILE PHOTO: A man wearing a mask walks past the headquarters of the People’s Bank of China, the central bank, in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. Businesshala / Jason Lee

Data released on Wednesday by the People’s Bank of China showed banks made 826.2 billion yuan ($129.27 billion) of new loans in October, sharply down from 1.66 trillion in September, but a Businesshala poll of analysts showed. were better than the expected 800 billion.

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New loans were up from 689.8 billion yuan a year earlier.

“There is some indication that PBOC policy is becoming more supportive in response to tensions in the property sector. As such, we think it may trough credit growth,” Capital Economics said in a note.

“But the general gap means that tight credit conditions will continue to be a major impediment to economic activity for some time.”

Outstanding yuan debt rose 11.9% from a year earlier, in line with expectations and is hovering at the lowest level since May 2002.

Last month, central bank governor Yi Gang said the growth of China’s money supply and total social financing were largely in line with nominal GDP growth, and that liquidity was adequate.

Policy sources and analysts are likely to ease monetary policy by the PBOC to prop up the economy, as slowing economic growth and rising factory inflation fuel concerns, policy sources and analysts said.

targeted policy tools

Wen Bin, a senior economist at Minsheng Bank, said he expects the central bank to rely on targeted policy tools in the near term to support smaller firms and some other sectors.

On Monday, the PBOC said it would provide low-cost loans to financial institutions to help firms cut carbon emissions, supporting China’s long-term carbon-neutral goals.

Analysts at Goldman Sachs estimate that the PBOC could provide around 1.2 trillion yuan of financial support in the coming year.

Central bank data showed household loans, mostly mortgages, fell to 464.7 billion yuan in October from 788.6 billion in September, while corporate debt declined to 310.1 billion from 980.3 billion.

Outstanding total social financing (TSF) growth, a broad measure of credit and liquidity in the economy, stood at 10.0% in October, unchanged from September.

TSF includes off-balance sheet forms of financing outside the traditional bank credit system, such as initial public offerings, loans from trust companies, and bond sales.

In October, TSF fell to 1.59 trillion yuan from 2.9 trillion yuan in September. Analysts polled by Businesshala had expected an October TSF of 1.6 trillion yuan.

Central bank data showed the broad M2 money supply grew 8.7% from a year earlier, up from a Businesshala poll forecast of 8.3%. M2 rose 8.3% in September.

China’s factory gate inflation hit a 26-year high in October as coal prices soared amid a power crunch in the industrial sector, further narrowing profit margins for producers and worries about stagflation.

Reporting by Judy Hua and Kevin Yao; Editing by Simon Cameron-Moore

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