China Credit Growth Slows on Holidays, Drop in Bond Sales

China’s credit growth slowed after a strong rebound in recent months, reflecting both the declining issuance of government bonds and seasonal factors in October when businesses were shut because of public holidays.

  • Aggregate financing was 1.42 trillion yuan ($215 billion), the People’s Bank of China said Wednesday, largely in line with the 1.4 trillion median forecast in a Bloomberg survey of economists. In September, the amount was about 3.48 trillion yuan and 868 billion yuan in the same month of 2019.
  • Financial institutions offered 689.8 billion yuan of new loans in the month, lower than estimates of 775 billion yuan
China Credit Growth Slows on Holidays, Drop in Bond Sales

Key Insights

  • Broad M2 money supply rose 10.5% in October from a year earlier, easing slightly from 10.9% in September
  • The stock of outstanding credit grew 13.7% last month, up from 13.5% in September, while the stock of outstanding yuan loans rose 13.3% to 168.9 trillion yuan
  • Bank lending growth usually eases in October compared to the previous month as the week-long National Day holiday affects business activity. The reduced pace of local government special bond sales as the quota runs out magnified the downward trend
  • Credit growth is still stable but dipped in October due to seasonality, said Liu Peiqian, China economist at Natwest Markets Plc in Singapore. “Aggregate financing growth may level off into year end” as the local government special bond issuance quota was completed last month, she said
  • China’s economy has rebounded steadily from the coronavirus shocks, with a pick-up in industrial output followed by some recovery in private consumption. A gauge of the manufacturing sector expanded for the eighth straight month in October, while the services purchasing managers’ index reached its highest since June 2012
  • With that momentum, China’s central bank has begun talking about normalization of monetary policy, while also cautioning against a hasty exit of stimulus measures

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  • Shadow banking credit fell 213.8 billion yuan in October
  • Net financing of corporate bonds rose from a month earlier, while government bond issuance was less than half the level in September
  • New yuan deposits declined for the first time since Feb. 2018

©2020 Bloomberg L.P.

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