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China: Credit growth and money supply disappoint in October

November 14, 2014

New yuan loans totaled CNY 548 billion (USD 89.4 billion) in October, which was well below the CNY 857 billion recorded in the previous month. The print undershot the CNY 626 billion market analysts had expected. In the 12 months up to October, new yuan loans totaled CNY 9.34 trillion (September: CNY 9.30 trillion), which represented the highest level in four months.

Total social financing—a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments—tumbled from CNY 1.1 trillion to CNY 663 billion. The print slightly undershot the CNY 888 billion that market analysts had expected. Moreover, the 12-month trailing total social financing dropped to its lowest level since December 2012. Meanwhile, in order to manage liquidity in the money market, the People’s Bank of China (PBOC) continued to conduct its twice-a-week reverse repurchasing operations.

Annual M2 growth, the broadest measure of money supply in China, fell from September’s 12.9% to 12.6% in October. The result came in under the 12.9% increase the market had expected and marked the lowest reading since March of this year.

October’s data suggest that the recent injections of liquidity from the Central Bank have not yet had an impact on credit growth. On 6 November, the People’s Bank of China confirmed that it injected CNY 770 billion into banks via its medium-term lending facility in an attempt to lower borrowing costs. Cooling domestic demand and the crackdown on shadow banking are still dragging on overall lending.

FocusEconomics Consensus Forecast participants expect M2 to expand 12.9% in 2014, which is unchanged over the previous month’s forecast. In 2015, the panel sees M2 growth of 12.4%, which is also unchanged from last month’s estimate.


Author: Ricard Torné, Lead Economist

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China Money October 2014 0

Note: New yuan loans in CNY billion and year-on-year variation of M2.
Source: People’s Bank of China (PBOC) and FocusEconomics calculations.


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