China's bank lending disappoints but non-banks advance
Lending by China’s banks came below market expectations, while the share of the non-bank sector in total lending has advanced
Net new lending in China edged up to 523 billion renminbi ($83.7 billion) in November from Octobers 505 billion renminbi (RMB) but was below expectations of a growth to 550 billion renminbi in a Bloomberg poll of analysts.
Banks made new loans worth 7.75 trillion RMB in the first 11 months of the year, overtaking the 7.47 trillion RMB in new loans over the whole of 2011, the data published Tuesday showed.
Wei Yao, an economist with Societe Generalre, noted that although new bank lending came in below expectations, non-bank credit accelerated further.
As a result, total credit growth was largely unchanged at 20% year-on-year nearly twice the pace of nominal GDP growth. Hence, overall liquidity conditions remain accommodative, Yao said.
Analysts from Raiffeisen bank said that lending joined weaker indicators such as export data, but Chinas industrial production and retail sales, by contrast, were good, all this pointing to a rather restrained economic recovery.
New borrowing by households was strong but its strength was offset by unusual weakness in corporate borrowing, with net medium and long-term bank lending to firms falling last month for the first time on record, according to Qinwei Wang, China economist at Capital Economics.
This could be a sign that loan demand is fading. But we suspect it reflects the fact that many firms can now access alternative sources of credit alongside a seasonal preference among banks to offer short-term loans at the end of the year, Wang said.
Bank loans have represented only 45% of total net new credit in the second half of the year, down from 62% in the first half, he added, quoting the broader total social financing (TSF) measure in the People Bank of Chinas (PBOC) report.
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On the TSF measure, net credit excluding RMB loans was 617 billion renminbi last month, much stronger than during the same period last year and more than double what firms borrowed from banks in November, with issuance of trust loans and corporate bonds the main sources of the growth, Wang noted.
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But even so, credit growth leveled off last month and the figures underline that the credit loosening that has helped fuel the economic rebound of recent months is still far more tentative than in earlier expansions, said Wang.
Indeed, it seems increasingly plausible that credit growth will peak soon unless policy is loosened further. We expect only a little more stimulus in 2013 and that current optimism about growth will fracture as the economy starts to slow again later in the year, he said.
But Societe Generales Yao said that the PBOC was unlikely to do more for the moment, as the activity data has improved.If anything, monetary and financial policymakers seem to have directed more of their attention towards the financial risk in the shadow banking system, she said.