China’s banks dole out record credit in 2017

BEIJING: China´s bank lending in the first 11 months of 2017 topped last year´s record, thanks to a much stronger-than-expected jump in November credit, even as authorities step up efforts to reduce risks in the financial system from a rapid build-up in debt.

Chinese banks extended 1.12 trillion yuan ($169.27 billion) in net new yuan loans in November, data from the People´s Bank of China showed on Monday, well above analysts´ expectations.

Analysts polled by Reuters had predicted new yuan loans would rise to 800 billion yuan, from October´s 663.2 billion yuan.

The November figure was well above the highest forecast in the poll.

That brought total new lending so far this year to 12.94 trillion yuan, exceeding 2016´s record tally of 12.65 trillion yuan and more than Italy´s GDP.

China is in the second year of a campaign to contain and reduce systemic threats to its financial system, with the central bank keeping liquidity tight as it seeks to flush out speculative financing and force growth-obsessed local governments to keep their debt levels under control.

Regulators unveiled sweeping new rules last month for the asset management industry to discourage riskier practices.

They also started targeting micro loans in a bid to curb short-term household debt, which is low but rising rapidly.

Household loans, mostly mortgages, rose to 620.5 billion yuan in November from 450.1 billion yuan in October, according to Reuters calculations based on the central bank´s data.

Household loans accounted for 55 percent of total new loans percent last month, down from 68 percent in October.

Corporate loans rose to 522.6 billion yuan in November from 214.2 billion yuan a month earlier.

Broad M2 money supply (M2) in November grew 9.1 percent from a year earlier, beating forecasts for an expansion of 8.9 percent and picking up from 8.8 percent in October, which was the slowest pace since records began in 1996.China´s central bank has said a slowdown in M2 growth could be a "new normal" due to official deleveraging efforts in the financial system and has urged markets not to read to much into the cooler growth.

The government´s push to reduce risks has triggered several sell-offs in bonds this year, however, with the most recent jitters spilling over to the stock market.

A central bank adviser said in November that he expected the government´s financial clampdown to be less forceful next year.

Outstanding yuan loans at the end of November grew 13.3 percent from a year earlier, faster than an expected 13 percent rise.

China´s total social financing (TSF), a broad measure of credit and liquidity in the economy, rose to 1.6 trillion yuan ($241.82 billion) last month from 1.04 trillion yuan in October.

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

That can provide hints of activity in China´s vast and unregulated shadow banking sector, which authorities have also been targeting in their campaign to reduce systemic risks.