China Bank Lending Rises

Chinese banks extended 794.6 billion yuan ($115.10 billion) in new yuan loans in November and look set to lend a record amount this year as Beijing boosts the economy to meet growth targets despite worries about the risks of prolonged debt-fueled stimulus.

Lending continued to be driven by consumer loans, primarily home mortgages, despite a series of measures rolled out by the authorities to cool surging home prices and avoid property bubbles, Reuters reported.

Off-balance sheet lending also unexpectedly spiked in November, raising concerns of tighter liquidity if regulators crack down on the shadow banking sector, economist David Qu at Australia & New Zealand Bank said.

New bank loans rose to a record 11.6 trillion yuan in the first 11 months of the year, according to Reuters calculations based on central bank data, and have handily surpassed the levels of China’s massive credit-led stimulus during the global financial crisis in 2009.

But analysts said the increase in November was partly seasonal, as outstanding yuan loan growth held steady at 13.1% by month-end on an annual basis, unchanged from October.

Corporate loan growth remained weak in November, increasing by only 165.6 billion yuan. That pointed to subdued credit demand from companies and a preference by banks to lend to households, as mortgages are usually considered higher quality assets, said Nomura economist Yang Zhao.

“With the property market cooling down, I would expect that loan growth faces downward pressure next year. I don’t think there is a fundamental improvement in investment demand by corporates,” said Yang.

Mid- to long-term loans to households rose to 569.2 billion yuan, or 71.2% of all loans, up from September’s 66.5%, though analysts said it might take a few months to know how tighter restrictions will impact mortgages.