China’s new yuan loans and broadest measure of credit exceeded estimates last month in data at odds with indications that the government wants to curb borrowing.
New local-currency loans were 624.6 billion yuan ($103 billion), the People’s Bank of China said yesterday in Beijing, compared with the 580 billion yuan median estimate of 41 analysts surveyed by Bloomberg News. Aggregate financing was 1.23 trillion yuan, topping all economists’ estimates, while M2 money supply increased 14.2 percent from a year earlier.
The figures suggest authorities are finding ways to support growth, with gains in retail sales and slowing industrial production presenting a mixed picture of the world’s second-largest economy. China may add clarity with a statement this week following an annual economic meeting in Beijing, after rising money-market interest rates and bond yields spurred speculation that officials are clamping down on debt.
“The current pace of extension of credit is still rather strong,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, who previously worked at the World Bank. The latest data “will lead people to wonder how adamant are the authorities to rein in credit growth, how serious are they to contain the increase in leverage.”
The Shanghai Composite Index fell 1.5 percent yesterday, the most since Nov. 13, as coal producers retreated and investors speculated the government may cut growth targets at its economic-policy meeting. The lending data were released after markets closed.
Previously released data this week gave a mixed picture of growth in November, as retail sales unexpectedly accelerated and exports topped forecasts, while industrial output and imports rose less than estimated.
Estimates for new local-currency loans ranged from 370 billion yuan to 700 billion yuan, while the 12 projections for aggregate financing ranged from 770 billion yuan to 1.2 trillion yuan.
Money supply was projected to increase 14.2 percent in November from a year earlier, based on the median estimate in a Bloomberg survey.
Yesterday’s data suggest that any growth slowdown “will not be too severe,” said Dariusz Kowalczyk, Hong Kong-based economist and strategist at Credit Agricole CIB. “Improved funding means that businesses will be able to continue investing, although at a limited pace.”
A cash crunch in June, marked by record-high money-market interest rates, indicated the government was reining in speculative lending after a record credit boom earlier in the year. The PBOC said in a report last month that the economy “may see a decline in leverage” over a relatively long period.
While the lending figures were higher than expected, “it’s hard to say that the central bank is changing its tightening course on just one month’s data,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc., told reporters yesterday in Beijing.
China should phase out its “proactive” fiscal policy, which resulted in a large deficit and adds to risks from local-government debt, according to a front-page commentary in yesterday’s China Securities Journal, which is operated by the official Xinhua News Agency. The fiscal policy stance has been in place since 2008, while China has said since 2010 that it’s implementing a “prudent” monetary policy.
In another sign of a debt clampdown, China will strengthen scrutiny of local-government borrowing and use it as an “important indicator” for regional officials’ performance reviews, Xinhua reported Dec. 9. People should be punished for decisions that “result in huge losses to the country,” waste resources or cause ecological damage, Xinhua reported, citing a circular from the Communist Party’s Organization Department.
Aggregate financing compared with 856.4 billion yuan in October and 1.12 trillion yuan in November 2012. Measures of non-bank lending showed increases in yesterday’s data, including entrusted loans of 270.4 billion yuan, up 47 percent from October, and trust loans of 101.8 billion yuan, more than double the previous month.
“It seems that either the government still wants to ensure enough credit to support growth, or that they have not been able to contain” non-bank loans in aggregate financing, said Wang Tao, chief China economist at UBS AG in Hong Kong.
The Chinese Academy of Social Sciences, a state researcher, said in an annual forecast Dec. 9 that new yuan loans will rise by about 12 percent to 10.4 trillion yuan in 2014, while aggregate financing will increase by about 11 percent to 19.3 trillion yuan.
China Cinda Asset Management Co., one of the nation’s four state-owned bad-loan managers, raised HK$18.5 billion ($2.4 billion) in an initial public offering, the company said yesterday. The IPO will help Cinda, created in 1999 to buy bad debts from state-owned banks on the verge of insolvency, to profit from a new round of non-performing loans following a $6.5 trillion lending spree since the end of 2008.