China’s credit growth disappoints in November as bond sales slow

CHINA’S credit growth was slower than forecast in November as government borrowing to finance stimulus eased off from the highs seen in October.

Aggregate financing was 2.45 trillion yuan (S$461 billion), the People’s Bank of China (PBOC) said on Wednesday (Dec 13). That compares to 1.85 trillion yuan in October and almost 2 trillion yuan in the same month last year. The median estimate of economists was 2.6 trillion yuan.

Financial institutions offered 1.09 trillion yuan of new loans in the month, versus a projected 1.3 trillion yuan.

In recent months, China has shifted towards fiscal stimulus, getting authorities to sell more debt to fund everything from infrastructure to disaster relief, as the main measure to bolster the economy. That has helped keep the flow of credit to the economy steady even as demand from households and companies to borrow money to buy property or invest has weakened.

The years-long collapse in the housing market has undermined credit demand from both developers and households. The PBOC has been reticent to cut interest rates substantially to aid credit demand and is seen by economists as waiting until early 2024 before it cuts policy rates.

The head of the central bank recently promised to keep the growth of money supply in check while guiding lending to key sectors including technology and advanced manufacturing. The PBOC is also trying to smooth out the credit cycle, encouraging lenders to bring forward some loans from next year to this year and then capping the amount of new loans they issue in early 2024, people familiar with the matter said.

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Last week, governor Pan Gongsheng reaffirmed that the PBOC will “control the monetary sluice” in an article in the People’s Daily that laid out the central bank’s priorities in response to the recent twice-a-decade financial policy meeting. Officials have used the language in the past to underscore the PBOC’s desire to avoid massive easing leading to a rapid buildup of debt. BLOOMBERG