China’s Credit Growth Accelerated in September

(Bloomberg) -- China’s credit growth continued to accelerate in September, with an expected seasonal increase boosted by faster bond issuance and easier monetary policy.

Aggregate financing was 2.27 trillion yuan ($321 billion) last month, compared to about 1.98 trillion yuan in August, the People’s Bank of China said Friday. The median estimate by economists was 1.9 trillion yuan. The central bank added exchange-traded asset-backed securities based on corporate bonds to the data from September, the PBOC said in a statement.

Key Insights

• Financial institutions offered 1.69 trillion yuan of new loans in the month, versus a projected 1.36 trillion yuan
• Broad M2 money supply grew 8.4% from a year earlier
• Net financing of corporate bonds rose to 401.9 billion yuan from 304.1 billion yuan the previous month
• The PBOC moved to ease monetary conditions in September to encourage credit growth, cutting the amount of reserves banks have to hold by a full percentage-point and guiding the reference rate for loans lower
• Still, the PBOC has refrained from cutting interest rates like other major central banks, with Governor Yi Gang saying he’s “not in a rush” to add massive monetary stimulus. That’s raised doubts that even if policy does feed through to somewhat faster credit growth, it’s not enough to arrest the economy’s downward slide
• “Policy easing has been gradually picking up over the past month,” said Julia Wang, Greater China senior Economist at HSBC Holdings Plc in Hong Kong: “More easing is needed in the coming months, but China certainly has enough room and policy ammunition to put a floor under growth.”

What Bloomberg’s Economists Say..

In overall terms, the credit data are unlikely to affect monetary policy, in our view. Weakness in the economy captured by a wider range of other data means the People’s Bank of China is set to continue easing at a measured pace.

-- Chang Shu and David Qu, Bloomberg Economics

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• The data signal that the shadow banking sector continued to contract: Entrusted loans fell by 2.1 billion yuan, trust loans declined 67.2 billion yuan and undiscounted bankers acceptances fell 42.9 billion yuan.

--With assistance from Kevin Hamlin.

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net;Tomoko Sato in Tokyo at tsato3@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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With assistance from Bloomberg