Chinese new bank loans hit a record $ 3.13 billion in 2021, despite falling in December

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Yuan banknotes can be seen in this illustrative photograph taken in Beijing on July 26, 2010. REUTERS / Jason Lee / File Photo

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  • Dec new loans 1.13 trln yuan against f’cast 1.25 trln yuan
  • Dec. M2 money supply + 9.0% y / y, vs f’cast of + 8.7%
  • Dec TSF 2.37 trln yuan, against f’cast 2.45 trln yuan
  • C.bank could opt for modest easing to support growth

BEIJING, Jan. 12 (Reuters) – New bank lending to China fell more than expected in December compared to the previous month, but lending for the full year 2021 set a record as the central bank maintained its political support to cushion the downturn in the economy.

Chinese banks granted 1.13 trillion yuan ($ 177.56 billion) in new yuan loans in December, down from 1.27 trillion yuan in November and below analysts’ expectations, according to data released Wednesday by the People’s Bank of China.

Analysts polled by Reuters had predicted that new yuan loans would fall to 1.2 trillion yuan in December. The tally was less than 1.27 trillion yuan a year earlier.

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However, new bank loans hit a record 19.9 trillion yuan for the year, up 1.6 percent from 19.630 trillion yuan in 2020 – the previous record – and equivalent to more than UK gross domestic product.

China’s economy got off to a good start in 2021 as activity continued to rebound from a pandemic-induced slump the previous year, but has lost momentum in recent months due to a market slowdown real estate, reduced industrial pollution and strict COVID-19 restrictions that have shaken consumer confidence and spending.

To support declining growth, the central bank cut banks’ reserve requirement ratio (RRR) on December 15, its second such move in 2021, freeing up 1.2 trillion yuan in long-term liquidity to support the commercial activity. Read more

The central bank also cut rates on its repayment facility by 25 basis points (bps) to support the rural sector and small businesses. Read more

Most analysts expect further RRR cuts this year, with some also predicting key rate cuts if activity continues to slow. More aggressive rate cuts are not expected in China, however, especially as the US Federal Reserve appears poised to start raising rates soon, which could lead to capital outflows from emerging markets. Read more

The downturn in properties is expected to continue into the first half of this year, with the recent local spread of the highly contagious Omicron variant posing a new challenge.

China will continue to implement proactive fiscal policy and prudent monetary policy in 2022. It will keep economic operations within a reasonable range in 2022, said the Politburo, the country’s top decision-making body.

“Debt to GDP was significantly reduced by 10 percentage points in 2021, but growth has slowed below the comfort of policymakers.

area, policymakers have clearly moved to outright easing, ”Morgan Stanley analysts said in a note earlier this week.

Broad money M2 increased 9.0% from a year earlier, according to central bank data, above estimates of 8.7% predicted in the Reuters poll. M2 increased 8.5% in November compared to a year ago.

The outstanding amount of yuan loans increased 11.6% in December from the previous year, compared to an increase of 11.7% in November. Analysts were forecasting growth of 11.7%.

Growth in the total social finance stock (TSF), a general measure of credit and liquidity in the economy, accelerated to 10.3% in December from the previous year and to 10.3% in December. 1% in November.

TSF includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.

In December, the TSF fell to 2,370 billion yuan against 2,610 billion yuan in November. Analysts polled by Reuters had forecast a TSF of 2.4 trillion yuan for December.

($ 1 = 6.3641 Chinese renminbi yuan)

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Reporting by Judy Hua and Kevin Yao; Editing by Kim Coghill

Our Standards: Thomson Reuters Trust Principles.

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