China: Credit indicators suggest tighter conditions
January 15, 2014
New yuan loans totalled CNY 483 billion (USD 80 billion) in December, which was well below the CNY 625 billion recorded in the previous month and marked a year-low. The print undershot market expectations of loans totalling CNY 570 billion. In the full year 2013, new yuan loans totalled CNY 8.9 trillion, which was up from the USD 8.2 trillion recorded in 2012.
Total social financing - a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments - was stable in December, totalling CNY 1.2 trillion (November: CNY 1.2 trillion). Meanwhile, in mid-December money market rates shot up to their highest level since June after the People's Bank of China (PBOC) stopped carrying out its twice-a-week reverse repurchasing operations, which provide liquidity into the financial system, in the beginning of December. The PBOC, however, decided to provide funds to selected banks and resumed its regular open market operations on 24 December. According to analysts, the recent credit squeeze mainly reflects the PBOC's willingness to tighten credit conditions.
M2, the broadest measure of money supply in China, rose 13.6% over the same month of the previous year in December (November: +14.2% year-on-year). The increase undershot the 13.9% rise that markets had expected.
FocusEconomics Consensus Forecast participants expect M2 to expand 12.9% in 2014, which is down 0.2 percentage points over the previous month's forecast. In 2015, the panel sees M2 growth at 13.0%.