China’s M2 Money Supply up 11.8% YoY at End of October, New Renminbi Lending Plunges

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Growth in China’s M2 money supply breached the double-digit threshold to approach 12% as of the end of October, according to the latest raft of official data from the Chinese central bank. New renminbi lending sharply contracted in the month however, which could prompt further action from regulators.

As of the end of October China’s broad M2 money supply stood at 261.29 trillion yuan, for year-on-year (YoY) growth of 11.8%, according to figures released by the People’s Bank of China (PBOC) on 10 November.

While this pace of growth marked a deceleration of 0.3 percentage points compared to YoY growth of 12.1% at the end of the previous month, it nonetheless marked an acceleration of 3.1 percentage points compared to the same period last year.

Zhou Maohua (周茂华), financial markets macro-researcher with China Everbright Bank, said to state-owned media that the high YoY growth rate in the M2 money supply is a reflection of the maintenance of a “moderately loose” monetary environment within China, and continue to provide vigorous support to market recovery.

While the M2 money supply balance continued to post strong growth in October, renminbi lending levels saw a sizeable decline.

New renminbi loans in October were 615.2 billion yuan, for a marked contraction compared to 2.47 trillion yuan yuan in September as well as 826.2 billion yuan in October last year.

Jiang Fei (蒋飞), chief macro-analyst from China Great Wall Securities said that financial demand proved again to be insufficient in October, with lacklustre levels of new lending dragging down growth in total social financing.

Jiang also imputes the decline to a cyclical trend that has emerged in new renminbi loans since April.

“In April new renminbi loans were 645.5 billion yuan, while in May and June they surged to 1.89 trillion yuan and 2.81 trillion yuan,” wrote Jiang on Weibo.

“In July the print fell considerably…new renminbi loans stood at 679 billion yuan, 1.2 trillion yuan and 2.47 trillion yuan in July, August and September respectively.

“Yet in October new loans once again fell to 615.2 billion yuan…it cannot be denied that at the end of each quarter factors such as a lending rush lead to large-scale increases in loans, and that within the quarter there are cyclical signs.”