Chinese bank loans totaled just 505 billion yuan in October, missing expectations of 590 billion yuan. This was down from 14 per cent from a year ago, and from 623 billion yuan the previous month.
Medium-to-long-term mortgage loans fells to to 115 billion yuan, from 159 billion yuan in September, but was higher than the January-September average.
Societe Generale’s Wei Yao writes that it looks as thought the People’s Bank of China intends to cap full-year bank lending at 8.5 trillion yuan or less. She writes that this is likely because the central bank is worried about inflation:
“Given the previous lesson, the PBoC may have started considering more about potential (lagged) impact of monetary easing on domestic inflation down the road.”
But experts write that non-bank credit has been compensating for the decline in bank loan growth and is part of Beijing’s efforts to deepen its financial markets. Bank of America’s Ting Lu writes:
“The decline of RMB new loans was largely offset by rising new corporate bond financing. It’s now very clear that the corporate bonds have been increasingly replacing bank loans in funding long-term infrastructure projects.”
This chart from SocGen shows that non-bank loans climbed even as bank loans slowed in October:
This chart from Bank of America shows the decline in renminbi loans, compared with the rise in total social financing (a measure of liquidity in the economy):
Photo: Bank of America
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