China Credit Expands Most Since March on Robust Mortgage Lending

  • Aggregate financing rose to 1.74 trillion yuan in November
  • Credit supply remains robust even amid property market curbs

China’s broadest measure of new lending jumped the most since March, boosted by borrowing for home loans and a resurgence of shadow-banking activity.

The Details

  • Aggregate financing rose to 1.74 trillion yuan ($252 billion) in November, compared with a median estimate of 1.1 trillion yuan in a Bloomberg survey and 896.3 billion yuan the prior month
  • New yuan loans climbed to 794.6 billion yuan from 651.3 billion yuan a month earlier, boosted by home loans
  • The broad M2 money supply increased 11.4 percent from a year earlier after climbing 11.6 percent the prior month

Big Picture

The surge in new credit comes as the economy shows further evidence of strengthening. While policy makers are taking steps to rein in bubbles, credit-fueled acceleration is gathering pace as old smokestack industries regain momentum. President Xi Jinping is certain China will achieve its major economic goals this year, according to a statement released Friday.

Economist Takeaways

"Seven months after the People’s Daily called time on the credit binge, the data suggest that little progress has been made," Tom Orlik, chief Asia economist for Bloomberg Intelligence in Beijing, wrote in a report. He said outstanding credit at year-end is on pace to be about 265 percent of gross domestic product, up from 246.8 percent at the end of 2015.

"The property containment measures still aren’t fully working," said Andrew Polk, Beijing-based head of China research at Medley Global Advisors, which advises institutional investors. "To get property under control there will have to be a fundamental shift toward more constrained monetary policy. Administrative measures just aren’t effective enough against strong monetary growth, even if the latter is not accelerating."

"Shadow banking is active again as the economy warms up and demand grows," said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. "Credit demand from small- and medium-sized companies rebounded as undiscounted bankers acceptance bills, a major financing tool for this kind of companies, jumped."

"The policy tone from the PBOC will turn to more hawkish in the near future," said Zhou Hao, an economist at Commerzbank AG in Singapore. "Authorities are concerned about the bubble risks in property, bond and commodity markets."

The Details

  • The main categories of shadow finance -- bankers acceptances, entrusted loans and trust loans -- all increased significantly
  • Mid- and long-term household loans added 569.2 billion yuan last month, accounting for more than two thirds of total new yuan loans
  • Foreign currency deposits increased 11.4 percent from a year earlier, the People’s Bank of China said Wednesday. That was more than double the 4.8 percent rise in October.

— With assistance by Yinan Zhao, and Miao Han

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