China Oct, New Bank Lending Dips Less Than Expected, Stagflation Risk Limits Room For Easing

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BEIJING (Reuters) – New bank lending to China fell sharply in October compared to the previous month, but not as bad as expected by analysts who expect the central bank to cautiously ease monetary policy due to the risks of stagflation.

FILE PHOTO: A man wearing a mask walks past the headquarters of the People’s Bank of China, the central bank, in Beijing, China as the country is hit by an outbreak of the novel coronavirus on February 3, 2020. REUTERS / Jason lee

Data released by the People’s Bank of China on Wednesday showed that banks granted 826.2 billion yuan ($ 129.27 billion) in new yuan loans in October, down sharply from the 1.66 trillion yuan. September yuan and better than the drop to 800 billion yuan according to analysts polled by Reuters. planned.

The new loans were over 689.8 billion yuan a year earlier.

Central Bank Governor Yi Gang said last month that China’s money supply and total social finance growth were broadly in line with nominal GDP growth, and liquidity is plentiful.

The People’s Bank of China (PBOC) will likely act with caution in easing monetary policy to support the economy, as slowing economic growth and surging factory inflation fuel concerns about stagflation, have said political sources and analysts.

Inflation at China’s factories hit a 26-year high in October as coal prices soared amid an electricity crisis in the country’s industrial heartland, further reducing producer profit margins and exacerbating fears of stagflation.

Broad money M2 increased 8.7% from a year earlier, according to central bank data, above estimates of 8.3% predicted in the Reuters poll. M2 increased 8.3% in September.

The outstanding amount of yuan loans increased 11.9% from the previous year, compared to an increase of 11.9% in September. Analysts were forecasting growth of 11.9%.

Growth in the total social finance stock (TSF), a general measure of credit and liquidity in the economy, stood at 10.0% in October, unchanged from September.

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 October, the TSF fell to 1.59 trillion yuan, from 2.9 trillion yuan in September. Analysts polled by Reuters had expected an October TSF of 1.6 trillion yuan.

Reporting by Judy Hua and Kevin Yao; Editing by Simon Cameron-Moore


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