China’s Yuan Loans Trail Estimates

China’s new local-currency loans fell more than forecast last month while a broader measure of financing surged 28 percent, highlighting the economic rebound’s increasing dependence on non-bank credit that may add risks.

Loans were 454.3 billion yuan ($73 billion), according to People’s Bank of China data today, compared with the median estimate of 550 billion yuan in a Bloomberg News survey of 37 analysts and last year’s 640.5 billion yuan. Aggregate financing of 1.63 trillion yuan, which includes bank and non-bank lending, was up from 1.27 trillion yuan a year earlier.

The drop in bank loans may restrain a recovery in the world’s second-largest economy from a seven-quarter growth slowdown, while increasing use of less-regulated, higher-return shadow-banking products underscores a shift that the International Monetary Fund has said poses “new challenges to financial stability.”

“Negative headlines will weigh on sentiment,” even as the pickup in aggregate financing is “boding well for growth,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.

The central bank released the data ahead of trade figures due today from the customs administration and tomorrow’s inflation report from the statistics bureau.

China’s benchmark stock gauge, the Shanghai Composite Index, fell 0.1 percent as of 9:35 a.m. local time. It had gained 16 percent since an almost four-year low on Dec. 3 on signs the economy is picking up.

Money Supply

M2 money supply rose 13.8 percent in December from a year earlier, the PBOC said, compared with the median analyst estimate of 14 percent.

China’s foreign-exchange reserves, the world’s largest, rose the least since 2003 last year, today’s data showed. The holdings increased $128 billion to $3.31 trillion at the end of December from $3.29 trillion three months earlier and $3.18 trillion at the end of 2011. The median estimate of seven economists was for reserves of $3.32 trillion.

Local-currency loans as a share of funding fell to a record low last year, highlighting the growth of alternative financing channels that have prompted warnings of rising credit risks. New yuan bank lending was 8.2 trillion yuan in 2012, accounting for a 52 percent share of the 15.8 trillion yuan aggregate financing, according to today’s preliminary PBOC figures, the least in statistics dating to 2002, when bank loans had a 91.9 percent share.

The PBOC in April 2011 started providing data on aggregate financing, which includes bank and non-bank lending, on a trial basis as part of the release on loan and money-supply statistics.

Aggregate financing, also called total social financing, includes banks’ yuan loans and six other categories: foreign-currency loans, entrusted loans, trust loans, bankers’ acceptance bills, corporate bonds and non-financial stock sales.

Corporate bond sales rose 65 percent last year to 2.25 trillion yuan, while trust loans surged more than sixfold to 1.29 trillion yuan, the PBOC data showed.

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