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 Chinese banks extended 708.9 billion yuan ($109.81 billion) of new
loans last month, more than the 700 billion yuan economists had
expected and up 38 percent from October.
Total social financing, a broader measure of net new credit, more
than doubled to 1.02 trillion yuan from the previous month, while
broad money supply (M2) rose 13.7 percent year-on-year, its
strongest pace since June 2014 and up from 13.5 percent in October.
The stronger showing was led by increases in conventional lending,
bond issuance, and corporate fundraising via equity markets, while
forms of credit associated with riskier shadow banking products
continued to decline, Friday's date showed.
In addition, the new lending was dominated by the long-term and
medium-term loans that Beijing wants. They comprised 65 percent of
total new loans, up from 50 percent in the first nine months.
Policymakers have been trying to boost productive investment through
monetary easing without stimulating unhealthy speculation, which is
often fueled by shorter-term financing.
Beijing has been pushing hard to get bogged-down infrastructure
spending back on track to offset slowing economic growth; in October
fiscal expenditures rocketed up 36.1 percent, the biggest rise in
over 3 years.
Outstanding loans rose by 14.9 percent from a year ago, below
expectations of 15.3 percent and October's 15.4 percent.
MIXED PICTURE
Other data earlier this week showed downward pressure on the world's
second-largest economy persisted in November, worrying those who had
expected activity to stabilize in the fourth quarter after a
year-long flurry of stimulus measures including both rate cuts and
fiscal spending.
"Aside from seasonal factors driving up new loans, the rebound was
weaker than expected and lower than the 852.7 billion yuan in
November 2014, indicating that domestic demand remained soft and
banks were cautious to provide new loans amid rising credit risks,"
wrote ANZ economists in a research note, calling for more rate cuts
in response.
November exports fell for a fifth consecutive month and imports
declined for the 13th month straight, while weak consumer and
producer prices raised concerns that the economy could be sucked
into a Japan-style deflationary trap.
Activity data for November, including industrial output, investment
and retail sales, is due to be released on Saturday.
Credit demand has softened in China along with the economy, while
bad loans are on the rise, making banks more risk averse.
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Many companies, especially in heavy industry, are saddled with
overcapacity and are in no mood to take on new debt, especially
given that analysts estimate that inflation-adjusted lending rates
are averaging around 10 percent, far higher than returns on
investment in many sectors.
China's central bank has cut interest rates six times since last
November and reduced the amount of cash that banks must set aside as
reserves. The government has also eased restrictions on home buying
to boost the sluggish property market.
More support measures are expected in coming months.
"As deflationary pressure persists and capital outflows continue, we
expect the PBOC to cut banks' reserve requirement ratio (RRR) by 50
basis points (bps) in the remainder of December as well as a total
of 200 bps in 2016 to maintain adequate liquidity and support
growth," ANZ economists said.
"Meanwhile, we expect the Standing Lending Facility (SLF) rates to
be cut by at least 100bps next year."
Economic growth dipped to 6.9 percent in the third quarter,
according to official statistics, dropping below the 7 percent mark
for the first time since the global financial crisis.
Premier Li Keqiang said last week that China was on track to reach
its economic growth target of about 7 percent for the full year,
though some analysts suspect real growth levels may be much lower
than official data suggest.
Other data on Friday showed China attracted 704.33 billion yuan
($114 billion) in foreign direct investment (FDI) in the first 11
months of this year, up 7.9 percent from the same period a year
earlier.
(Additional reporting by Kevin Yao; Writing by Pete Sweeney; Editing
by Kim Coghill)
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