New bank lending in China is expected to have plunged in October from the prior month, but the yuan loans are likely to be higher than a year earlier, as the central bank treads warily on policy easing amid stagflation concerns.
Chinese banks are estimated to have issued 800 billion yuan ($125.04 billion) in net new yuan loans last month, down from 1.66 trillion yuan in September, according to the median estimate in the survey of 26 economists.
That would be higher than 689.8 billion yuan issued in the same month a year earlier.
Central Bank Governor Yi Gang said last month that growth of China’s money supply and total social financing were largely in line with nominal GDP growth, and liquidity is ample.
The People’s Bank of China (PBOC) will likely move cautiously on loosening monetary policy to bolster the economy, as slowing economic growth and soaring factory inflation fuel concerns over stagflation, policy sources and analysts said.
A few Chinese banks have sped up the disbursement of home loans in some cities, but no wave of new credit is being unleashed just yet amid a heavy regulatory push to deleverage the sector.
Momentum is faltering in the world’s second-largest economy due to fresh curbs to control COVID-19 outbreaks, power shortages that have hit factories and a debt crisis in the real estate sector, among other factors that have gummed up activity.
The PBOC said on Monday it will provide financial institutions with low-cost loans to help firms cut carbon emissions, supporting the country’s long-term carbon-neutrality goals.
Analysts at Goldman Sachs estimated that the PBOC could provide around 1.2 trillion yuan in funding support over the coming year.
Annual outstanding yuan loans were expected to grow by 11.9% for October, the same as in September, the poll showed. Broad M2 money supply growth in October was seen at 8.3%, the same as in the previous month.
China’s local governments issued a net 2.37 trillion yuan in special bonds in the first nine months, the finance ministry data have shown.
The government will strive for early issuance of 2022 special local government bonds.
Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF growth slowed to 10.0% in September, the weakest pace since at least 2017.
In October, TSF is expected to fall to 1.6 trillion yuan from 2.9 trillion yuan in the prior month.
($1 = 6.3980 Chinese yuan)