Chinese corporations’ demand for credit has turned sluggish as the economy cools, dragging new credit growth to nearly a two-year low in October.
Data from the central bank showed that in October the country added 618.9 billion yuan ($88 billion) of total social financing — which includes financing activities that exist outside the conventional bank system such as initial public offerings, loans from trust companies and bond sales.
The figure fell sharply from 2.27 trillion yuan in September and 737.4 billion yuan in the same month of 2018, according to the central bank data. A Caixin survey found a median estimate by economists of 940 billion yuan.
New credit growth in October slowed to the weakest pace since at least 2017 based on Bloomberg data, reflecting weak corporate demand for credit and seasonal effects. Weakening credit growth may force regulators to take further easing measures, analysts said.
“The anemic credit data — coming on the heels of data showing deepening deflation in the industrial sector — reinforce our expectations that the People’s Bank of China will continue to ease monetary policy,” said Chang Shu and David Qu, economists at Bloomberg.
Financial institutions issued 661.3 billion yuan of new loans in October, compared with 1.76 trillion yuan in September. Broad money supply, or M2, grew 8.4% from a year earlier, unchanged from the previous month, the central bank said.
The credit data reflected weakening financing demand amid downward pressure on the economy, said Chen Yi, analyst at the Bank of Communications.
Banks usually lend less in October as the week-long National Day holiday affects business activity. About 63.7%, or 421 billion yuan, of the new loans in October were borrowed by households, up from an average 41.7% in the previous nine months. Borrowing by nonfinancial companies dropped to 126.2 billion yuan, or less than 20% of the total.
The completion of local government debt issuance also magnified the slowing credit growth in October, said Lu Zhengwei, chief economist at the Industrial Bank.
Local government debt issuance was a net drag on the data in October, subtracting 20 billion yuan from total new financing as some debt matured.
The slowing credit data also reflected continued contraction in shadow banking as off-balance sheet entrusted loans, trust loans and undiscounted bankers acceptances all declined at a faster pace, analysts said.
Contact reporter Han Wei (weihan@caixin.com)
Additional reporting by Bloomberg
