China: Credit indicators point to tighter monetary conditions
November 11, 2013
New yuan loans totalled CNY 506 billion (USD 83 billion) in October, which was well below the CNY 787 billion recorded in the previous month and marks the lowest level in 10 months. The print undershot market expectations of loans totalling CNY 580 billion. In the 12 months up to October, new yuan loans totalled CNY 8.75 trillion (September: CNY 8.75 trillion).
Total social financing - a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments - moderated from CNY 1.4 trillion in September to CNY 856 billion in October. Meanwhile, in order to manage liquidity from the money market, the People's Bank of China (PBOC) continued to conduct its twice-a-week reverse repurchasing operations.
M2, the broadest measure of money supply in China, rose 14.3% over the same month last year in October (September: +14.2% year-on-year). The increase was in line with market expectations.
According to some analysts, the recent slowdown in new loans and total financing, along with the withdrawal of funds from the money market in October, suggests that the Central Bank is seeking to maintain liquidity at a tightly-balanced level.
The government's M2 growth target for this year is 13.0%. FocusEconomics Consensus Forecast participants expect M2 to expand 13.9% in 2013, which is unchanged over the previous month's forecast. In 2014, the panel sees M2 growth at 13.1%, which is also unchanged compared to last month's estimate.