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China's credit growth slows as policy support eases

[SHANGHAI] China's credit growth moderated in December, suggesting that the massive increase in credit since last year may have peaked as the central bank seeks to normalise policy.

Aggregate financing was 1.72 trillion yuan (S$355.4 billion), the People's Bank of China said Tuesday. That compares to 2.13 trillion yuan in November, with much of the decline coming from a large drop in shadow-banking activities.

Financial institutions offered 1.26 trillion yuan of new loans in the month, lower than in November but higher than December 2019.

Broad M2 money supply grew 10.1 per cent from a year earlier.

The stock of outstanding credit was 284.8 trillion yuan in December, 13.3 per cent larger than a year ago. That was slower growth than in November.

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The stock of outstanding yuan loans rose to 171.6 trillion yuan.

As the economic recovery takes hold, China's central bank has started to explore the possibility of exiting some emergency stimulus measures rolled out during the pandemic, while maintaining necessary support in certain areas.

In an interview with state-run Xinhua News Agency Friday, central bank Governor Yi Gang said monetary policy in 2021 should be stable, adding that liquidity should be kept reasonable and ample, and the growth rates of M2 money supply and aggregate social financing should match that of nominal gross domestic product. He also indicated there'd be some tightening in credit supply, noting the need to prevent financial risks and stabilise the macro leverage ratio.

"Credit growth might have already peaked last November," Macquarie Group economists led by Larry Hu wrote before the data was released. "The broad direction toward tightening is clear." Net financing of corporate bonds slowed to the lowest level since Sept 2018 from a month earlier, while government bond issuance was stronger than a month earlier.

Shadow banking - comprising entrusted loans, trust loans, and undiscounted bankers acceptances- dropped by 737.6 billion yuan, the most in at least four years.

Medium and long-term lending to households and non-financial companies rose by almost 1 trillion yuan.


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