Lending by Chinese Banks Hit Record High for 2017 in November

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Chinese banks supplied the highest monthly volume of loans for 2017 in November, despite Beijing’s ongoing deleveraging campaign and efforts to contain credit expansion.

Official data from the People’s Bank of China indicates that Chinese banks posted 1.12 trillion yuan (USD$169.27 billion) in net new yuan loans last month, far ahead of consensus expectations as well as the highest forecast gathered in a recent survey by Reuters.

A survey of analysts by Reuters had new yuan loans in November rising to 800 billion yuan, from 663.2 billion yuan in October.

Household loans alone, comprised primarily of mortgages, lifted to 620.5 billion yuan in November from 450.1 billion yuan in the preceding month, while corporate loans rose to 522.6 billion yuan from 214.1 billion.

Household loans saw their share of total new lending fall to 55%, from 68% in October.

The broad M2 money supply posted year-on-year growth of 9.1% in November, bouncing back from a record low of 8.8% in the preceding month, while outstanding yuan loans saw a 13.3% year-on-year rise.

Total social financing, which serves as a broad measure of new private credit in the Chinese economy, increased to 1.6 trillion in November from 1.04 trillion yuan in October.

Beijing launched a much-vaunted deleveraging campaign earlier this year in a bid to reduce the burgeoning mountain of debt accumulated since the Great Financial Crisis nearly a decade ago.

External observers have repeatedly expressed concerns about China’s exorbitant debt levels, with the IMF calling for Beijing to dial down its ambitious growth targets in order to contain credit expansion.

Chinese regulators have had to walk a fine line, however, between containing credit expansion and maintaining economic growth.

While the latest data indicates that Beijing has erred on the side of caution with respect to growth by permitting record levels of bank lending this year, some analysts point out that the pace of credit expansion is easing.

“The upshot is that tighter monetary conditions have driven a persistent decline in credit growth in recent quarters, with this slowdown accelerating last month,” said Julian Evans-Pritchard, China economist at Capital Economics to Reuters.

Evans-Pritchard expects monetary conditions to loosen further in the near-future.

“We think the drag on economic activity from this slowdown in credit creation will eventually triggered a renewed round of monetary easing.”

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