Caixin
Oct 15, 2020 05:37 AM
FINANCE

September Credit Growth Signals Stronger 3rd Quarter GDP, Central Banker Says

China’s banks offered 1.9 trillion yuan of new loans in September, up 48.4% from August.
China’s banks offered 1.9 trillion yuan of new loans in September, up 48.4% from August.

China’s credit continued robust growth in September, a sign that government efforts to funnel loans to businesses could lead to further recovery from the coronavirus-induced slump. The increase signals stronger economic expansion for the third quarter, a top central banker said.

China’s newly added social financing, a measurement of funds the real economy receives from the financial system, came in at 3.48 trillion yuan ($520 billion) in September, down slightly from 3.58 trillion yuan in August but up by 963 billion yuan year-on-year, central bank data showed Wednesday.

Banks offered 1.9 trillion yuan of new loans in the month, up 48.4% from August and exceeding analysts’ expectations. China’s third-quarter GDP growth is expected to show improvement from the previous quarter, said Ruan Jianhong, head of the central bank’s statistics department, at a news conference.

China is scheduled Monday to report third-quarter GDP and major economic data for September. Although the economy has improved from the fallout of the pandemic, it still faces challenges from weaker external demand in other coronavirus-stricken countries.

In the first three quarters of the year, newly added social financing reached 29.62 trillion yuan, an increase of 9.01 trillion yuan from the same period last year. New bank loans in the first nine months reached 16.26 trillion yuan.

At that pace, total social financing may exceed 30 trillion yuan by the end of 2020, and new bank loans may exceed 20 trillion yuan, in line with what central bank Governor Yi Gang forecast at the Lujiazui forum in June in Shanghai.

China’s overall credit and social financing are growing at a reasonable pace so far this year and are expected to have further boosted economic growth in the third quarter, creating better conditions for maintaining a reasonable macro leverage ratio, Ruan said.

The People’s Bank of China projected that the 2020 macro leverage ratio — the percentage of debt in the government, household and corporate sectors relative to GDP — to maintain an annual growth of 8.1 percentage points, compared with growth of 11.4 percentage points four years ago, before the central bank pledged to stabilize the macro-leverage ratio in 2017. The ratio’s moderated rate of growth suggests capacity for continued healthy economic expansion.

“What we are facing now is a special situation,” Ruan said. “The climbing of the macro leverage ratio reflects the macro policy support for epidemic prevention and control measures and the national economic recovery. We should allow the macro leverage ratio to rise temporarily and expand credit support for the real economy.”

China’s GDP may have grown 5.5% year-on-year in the third quarter as the economy gradually recovers from the Covid-19 pandemic, Caixin’s survey of 16 domestic and overseas institutions showed. That compares with a 3.2% growth rate in the second quarter.

In September, broad M2 money supply grew 10.9% from a year earlier. The stock of outstanding credit was 280.07 trillion yuan in September, 13.5% larger than a year ago and a faster expansion than the 13.3% in August.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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