China credit growth hits 12-month high in December

Chinese banks are continuing to lend to the economy and that should provide support to the economy in coming quarters, some economists said following the release overnight of the latest government data on credit growth.

So-called total social financing - the widest measure of credit growth in China - leapt by a net RMB1.82trn in December (consensus: RMB1.15trn), after a gain of RMB1.02trn in the previous month.

To take note of, the TSF figures were distorted by the ban on bank loans and corporate bond issuance for local governments. Taking that into account, TSF increased at a 14.4% year-on-year pace in December, one tenth of a percentage point quicker than in November and at its fastest clip in 12 months.

"The acceleration in broad credit since the middle of last year should feed through into stronger economic activity over the coming quarters. We also expect credit growth to remain strong going forward on the back of loose monetary conditions," Julian Evans-Pritchard and Chiang Liu, china economists at Capital Economics, explained in a research note sent to clients.

That overshadowed a drop in net renminbi loans from RMB709bn in November to RMB598bn last month (Capital Economics: RMB1bn), which in turn meant growth in outstanding loans slowed from a rate of 14.9% year-on-year in November to a pace of 14.3% in December.

However, the above figure was distorted too by a surge in loans to financial institutions linked to the rescue package put in place by Beijing to prop up the stockmarket, the economists added.