Chinese banks increase lending faster than seen
By
BEIJING--Chinese banks increased lending faster than expected in November amid signs that the central bank's bid to expand credit to a slowing economy was working.
The People's Bank of China last month continued to rein in lightly regulated shadow-bank lending even as it routed credit to the real economy, economists said Friday. But some added that it was too early to tell whether the monthly new loan expansion represented a sustained credit boost or a temporary blip at a time of weakness in the nation's manufacturing, real estate and trade sectors.
'One month is not enough to conclude that things have really improved,' said Crédit Agricole CIB economist Dariusz Kowalczyk. 'It's a small bright spot in an otherwise soft landscape.'
Total social financing, a broader measure of credit growth in the economy, posted strong growth last month while M2, the broadest measure, grew at a slower pace than the prior month.
Economists said November's increased demand for new yuan loans may have been driven by central bank moves aimed at relaxing bank-lending quotas and easing loan-to-deposit ratios. Under existing rules, Chinese banks can lend only 75% of the deposits they collect. Easing this rule effectively allows them to lend more.
CIMB economist Fan Zhang said the central bank might also cut the reserve requirement ratio--the proportion of deposits that banks need to keep in reserve with the central bank--by the end of the year in a bid to further increase lending. The nation's major banks are supposed to keep 20% of their deposits with the central bank, though certain smaller banks are allowed to lend out more if they meet requirements for extending credit to smaller companies and the farm sector.
Economists said they doubted last month's surprise interest-rate cut had much impact on the November lending data, given its timing relatively late in the month. On Nov. 21, the People's Bank of China pared the one-year lending rate by 0.4 percentage point to 5.6%, its first cut in more than two years.
Before the November cut, China's central bank showed a preference for targeted easing measures amid concern that an across-the-board cut in interest rates could encourage lending to industries suffering from overcapacity, including steel and cement.
But the persistent economic sluggishness convinced Chinese policy makers that more aggressive measures were needed.
Economic growth slipped to 7.3% in the third quarter from a year earlier, its slowest pace in five years.
Newly enforced regulations aimed at reducing shadow-lending activity--or loans made largely off banks' balance sheets--appear to be working at least for now, economists said, pointing to a reduction in the volume of new trust loans and instruments known as banker's acceptances.
'I don't think they'll stop here,' said Julian Evans-Pritchard, an economist with Capital Economics. 'They have more regulations on shadow banking in the pipeline.'
Economists said any additional monetary easing ahead will be at least partially offset by this effort to restrict shadow banking and thereby reduce risk in the financial system. Some analysts estimate that China's total debt exceeded 250% of gross domestic product this year.
Chinese banks issued 852.7 billion yuan ($137.5 billion) of new yuan loans in November, up from 548.3 billion yuan in October, the PBOC said Friday. Economists had forecast 650 billion yuan of new loans.
In November, total social financing, a broad measure of credit in the economy, came to 1.15 trillion yuan, up from 662.7 billion yuan in October. And M2, the broadest measure of money supply, was up 12.3% at the end of November from a year earlier, lower than the 12.6% increase at the end of October, according to the central bank. The figure was below the median 12.5% increase forecast by economists.
Analysts at China International Capital Corp. said in a note to clients that the central bank has to cut its bank reserve requirement ratio or inject more liquidity into the banking system to ensure that M2 reaches the government's 13% growth target for this year.
--Grace Zhu, William Kazer and Mark Magnier
Post a Comment for "Chinese banks increase lending faster than seen"