Goldman Sachs Updated China View Post Friday's Aggregate Finance/New Loans Data

Friday saw aggregate finance (4120bn yuan versus 3700bn expected) and new loans (2310bn yuan versus 2500bn expected) for September print mixed relative to expectations. The US Bank still expects further monetary policy easing in Q4 of this year, see below for more details.

• "At the press conference today, PBOC reiterated accommodative monetary policy stance and further stated the reduction of interest rates for outstanding mortgages was almost completed. Average interest rate for total outstanding mortgages declined by 42bps to 4.3% as of September end, according to the PBOC. By our estimates, this translates into RMB 160bn annual savings for households, or slightly more than 10bps of GDP. We continue to expect a 25bp RRR cut and 10bp policy interest rate cut in Q4 to facilitate government bond issuance and reduce funding cost for corporates and households next year.
  
  According to Xinhua, the next bi-monthly NPC standing committee meeting will be held during 20-24 October, with one of the meeting agenda items being the pre-approval of part of 2024 local government bond quota. As the pre-approved LGSB quota for the following year was required to be no higher than 60% of annual quota for the current year, this implies later this year the State Council can pre-approve as much as a RMB2.7tn quota for early 2024 local government bond issuance. However, in the briefing there was no mention of raising the 2023 fiscal deficit target, or extra-budget central government bond issuance, which were speculated by some offshore media early this week. This adds conviction to our view that China is unlikely to raise its 2023 official budget deficit target or issue RMB1tn of additional central government bond for infrastructure spending (which needs NPC approval) this year. Instead, we continue to expect more fiscal easing measures in the coming months in the form of an additional RMB500bn LGSB issuance and more policy bank financing support."