Chart of the Day: New Credit Grew Faster Than Expected in December

China’s total social financing (TSF), a broad measure of new credit in the economy, amounted to 1.59 trillion yuan ($240 billion) in December, putting it up 3.3 billion yuan year-on-year and beating analysts’ expectations, data from the People’s Bank of China showed on Tuesday.

TSF includes conventional bank lending and other forms of financing such as bond and equity issuances, trust loans and entrusted loans.

Analysts polled by Bloomberg and Reuters estimated that December’s TSF would amount to 1.3 trillion yuan and 1.2 trillion yuan, respectively, down from 1.52 trillion yuan in November.

New bank loans to the real economy and a net gain in corporate bonds were the main factors that drove December’s TSF to beat analysts’ expectations, wrote Wang Tao, chief China economist at UBS Investment Bank, in a note (link in Chinese).

As of the end of December, the country’s outstanding TSF stood at 200.7 trillion yuan, witnessing a slower year-on-year growth rate of 9.8%, down 3.6 percentage points from the previous year, according to data from the central bank.

Reductions in off-balance-sheet lending and sluggish demand for financing from debt-ridden state-owned enterprises and local government financing vehicles are the main reasons behind the slower credit growth in 2018, said Ruan Jianhong, head of the central bank’s statistics department, at a media briefing. As China pushes forward its deleveraging campaign, outstanding off-balance-sheet financing saw a sharp drop of 2.93 trillion yuan in 2018.

Total social financing includes off-balance-sheet financing, and can provide hints about activity in China’s “shadow banking” sector, which falls outside the conventional banking system and provides financing to many small and midsize enterprises.

China’s M2, a broad measure of money in circulation, increased 8.1% year-on-year in December, up from 8% in November, according data from the central bank.

For the year 2019, growth in TSF and M2 should roughly match growth in nominal gross domestic product, so as to provide sufficient financial support for the real economy, said Zhu Hexin, a central bank deputy governor, at a press conference.

Contact reporter Charlotte Yang (yutingyang@caixin.com)