China new bank lending stumbles as COVID flare-ups hit demand

BEIJING (Reuters) – New bank lending in China fell sharply in October from the previous month as COVID-19 outbreaks and a property sector downturn weighed on credit demand.

Chinese banks extended 615.2 billion yuan ($84.86 billion) in new yuan loans in October, about a quarter of the 2.47 trillion yuan in September, data released by the People’s Bank of China showed on Thursday.

Analysts polled by Reuters had predicted new yuan loans would fall to 800 billion yuan in October. The new loans were lower than 826.2 billion yuan a year earlier.

The world’s second-largest economy saw a faster-than-expected rebound in the third quarter but its growth prospects have dimmed due to a recurrence of COVID outbreaks, with lockdowns hurting factory and consumer activity. Falling home sales have also deepened the problems of indebted property developers.

Household loans, including mortgages, contracted by 18 billion yuan in October, versus 650.3 billion yuan in September, while corporate loans dropped to 462.2 billion yuan from 1.92 trillion yuan, central bank data showed.

China’s local governments issued a net 24.1 billion yuan in special bonds in September, the finance ministry has said, down from 51.6 billion yuan in August.

The central bank governor has pledged to maintain normal monetary policy and positive interest rates for as long as possible, projecting that China’s potential economic growth is likely to stay within a reasonable range.

China is on track to miss its annual growth target of around 5.5% – the latest Reuters poll forecast 2022 growth at 3.2%.

Broad M2 money supply grew 11.8% from a year earlier, central bank data showed, below analysts’ forecast of 12.0% in the Reuters poll. M2 grew 12.1% in September from a year earlier.

Outstanding yuan loans in October grew 11.1% from a year earlier, compared with 11.2% growth in September. Analysts had expected 11.2% growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.3% in October from 10.6% in September.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies, and bond sales.

In October, TSF fell sharply to 907.9 billion yuan from 3.53 trillion yuan in September. Analysts polled by Reuters had expected October TSF of 1.6 trillion yuan.

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