China’s Credit Growth Stayed Robust in September on Recovery

(Bloomberg) -- China’s credit continued to grow robustly in September, reflecting government efforts to add stimulus and stronger demand as the economic recovery continues.

Aggregate financing was 3.48 trillion yuan ($517 billion), the People’s Bank of China said on Wednesday, higher than the median estimate by economists. That compares to 3.58 trillion yuan in August and 2.51 trillion in September last year.

• Financial institutions offered 1.9 trillion yuan of new loans in the month, higher than estimates of 1.7 trillion yuan. Government bonds expanded by 1.01 trillion yuan, after 1.38 trillion the previous month.

Key Insights

• Broad M2 money supply grew 10.9% from a year earlier.
• The stock of outstanding credit was 280.07 trillion yuan in September, 13.5% larger than a year ago and a faster expansion than the 13.3% in August.
• The stock of outstanding yuan loans rose 13.2% to to 168.26 trillion yuan.
• China’s economic recovery momentum remained solid in the month, with activity in both manufacturing and services sector continuing to strengthen. Policy makers are seeking to normalize monetary policy, and will aim to fine-tune it to be more precise and targeted.
• “Overall it’s pretty strong, driven by government bond issuance and bank loans,” said Larry Hu, chief China economist at Macquarie Group Ltd. “For policymakers, they will continue to tighten on the margin. Most likely, there will be no rate cut or reserve ratio cut by the end of this year.”
• “M2 could be supported by the strong seasonal fiscal spending at the quarter end,” said Xing Zhaopeng, markets economist at Australia & New Zealand Banking Group. “Property tightening will limit credit expansion in the rest of 2020. Many banks said they have no more quota for mortgages. We may see the effect in October.”

What Bloomberg’s Economists Say

“A steeper-than-anticipated increase in China’s September credit suggests financial conditions are still supporting the economic recovery. Considering the revival in household spending, this bolsters our confidence the recovery will keep going in the months ahead.”

David Qu, China economist

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• China’s overall liquidity is reasonable and ample, while credit and social financing are growing at a reasonable pace as well, said Ruan Jianhong, head of the statistics department at the central bank.
• Shadow banking -- comprising entrusted loans, trust loans, and undiscounted bankers acceptances, barely expanded in the month, rising 2.6 billion yuan
• Net financing of corporate bonds declined to 142.2 billion yuan in the month, after 363.3 billion in August

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With assistance from Bloomberg