Caixin
Dec 10, 2020 05:56 AM
FINANCE

China’s November Credit Growth Shows Signs of Slowing

Chinese banks offered 1.43 trillion yuan of new loans in November, 45.6 billion yuan more than the same time last year.
Chinese banks offered 1.43 trillion yuan of new loans in November, 45.6 billion yuan more than the same time last year.

China’s overall credit continued expanding in November amid signs that robust growth may have started slowing.

Total social financing, the measurement of aggregate credit, grew 13.6% year-on-year to 2.13 trillion yuan ($326 billion) in November, according to data released Wednesday by the central bank. The growth was slightly lower than October’s 13.7% but largely in line with market expectations.

Analysts said November’s pace indicated that credit expansion might be peaking amid the economy’s strong recovery.

“Peak credit is the result of policy normalization, which will continue in the coming months,” said Larry Hu, head of China economics at Macquarie Group Ltd. “For 2021, we expect credit growth to slow to 11% from around 13.5% this year.”

Chinese authorities have signaled withdrawal from monetary stimulus as the economy’s rebound momentum strengthens and the government moves to bring debt under control.

Chinese banks offered 1.43 trillion yuan of new loans in November, 45.6 billion yuan more than the same time last year and slightly higher than estimates of 1.4 trillion yuan in a Caixin survey. Growth in outstanding loans slowed to 12.8% in November from 12.9% the previous month, central bank data showed.

Household loans remained strong in November with growth of 753.4 billion yuan, reflecting strength in the property market. Corporate long-term loans also were higher than the same period last year, indicating reviving business confidence.

Corporate bond issuance fell sharply in November, mainly affected by recent waves of bond defaults. Several companies canceled or delayed bond sales in November after the surprise default of Yongcheng Coal and Electricity Holding Group Co. Ltd., a state-backed coal mining company, rattled the bond market. Net financing of corporate bonds totaled 86.2 billion yuan in the month, 246.8 billion yuan less than the same time a year ago.

Off-balance sheet financing, including entrusted loans, trust loans, and undiscounted bankers acceptances, fell by 204 billion yuan in November.

Broad M2 money supply accelerated to 10.7% from 10.5% in October.

China will continue focusing on policy normalization in coming months, according to Hu at Macquarie, who said fiscal tightening and more property curbs are likely to be rolled out next year as economic growth stabilizes.

Wang Tao, head of China economic research at UBS Investment Bank AG, said China’s credit growth is reaching a peak and will gradually slow in coming months. Wang predicted the central bank will slightly raise benchmark rates in the second half of 2021.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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