Chinese bank lending data for October leaves analysts divided

The latest data on credit and lending patterns in China released on Thursday showed the country’s banks remained unwilling to lend, leaving economists divided as to how effective the central bank’s monetary easing had been.

New loans granted by the country’s lenders came in at 513.56bn yuan for October, well below the 800bn yuan which economists had been anticipating and down from 1.05tn yuan seen in the month before.

“The weaker-than-expected lending data just released are likely to add to doubts over the effectiveness of policy support. But our calculations suggest that credit growth is nonetheless continuing to accelerate,” Julian Evans-Pritchard, China economist at Capital Economics said in a research note sent to clients.

The rate of expansion in outstanding loans to the real economy, excluding financial institutions that is, held steady at 13.7%. Beijing has been funnelling funds to lenders as part of a stock market rescue package.

“On this basis, lending is still expanding at its fastest pace since mid-2014, Chinese New Year distortions aside,” Evans-Pritchard added.

So-called aggregate financing or total social financing increased by a net 476.7bn yuan (consensus: 1.05tn yuan).
In September it rose by 1.3tn yuan.

“This is quite weak, even stripping out the seasonality. The rebound in bank lending, boosted by the PBoC’s injection to the policy banks, has been short lived,” Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group in Hong Kong told Bloomberg.

In year-on-year terms, TSF increased at a 11.8% clip, down from 12.0% in the September.

On the other hand, growth in the money supply, as measured by the M2 monetary aggregate, printed at a 13.5% year-on-year rate of change for the same month, coming in comfortably ahead of the 13.2% which analysts had forecast.

Lending figures cap off week of mixed data releases

Data released in the days ahead of Thursday’s report had painted a mixed picture but by and large economists appeared to be expecting an improvement in the Chinese economy over the very short-term.

In that regard, on Wednesday Deutsche Bank’s chief china economist, Zhiwei Xhang, said that overall easier policy was perhaps starting to show, including in some of the leading indicators for fixed asset investment.

Zhiwei stuck to his forecast for GDP to grow by 7.2% year-on-year in the fourth quarter and then slowdown to 6.7% in 2016.

He did not expect any more interest rate or reserve requirement ratio cuts by the People bank of China, but said the chance of one more IR cut was rising post the soft CPI data published on 10 November.

According to some observers it was precisely the ineffectiveness of its monetary policy that had led authorities in Beijing to ramp up their spending in October, with fiscal outlays jumping by 36.1% from a year earlier to reach 1.35tn yuan, versus a 8.7% rise in fiscal receipts.