MNI: China Credit Growth Much Stronger Than Expected In Nov.

     BEIJING (MNI) - Growth in Chinese new bank lending and total social

financing (TSF) were much stronger than expected in November, according to data

released Monday by the People's Bank of China.

     M2 also recovered in November, rising 9.1% year-on-year to CNY167.00

trillion. The November growth rate accelerated from 8.8% in October and was

above the MNI survey median expectation of 8.9%.

     "The lower growth of M2 in October was because of a large increase of

fiscal deposits, which dragging down M2 growth by around 0.3-0.4 percentage

point," analysts at Bank of Communications (BoC) said. "Usually the impact of

fiscal expenditures is short-term, so November M2 growth was more normal," they

said. 

     In addition, "the higher growth of M2 in November is also caused by a

strong growth in new loans."

     Total new loans grew CNY1.12 trillion in November, nearly double the

increase of CNY663.2 billion recorded in October and well the MNI survey

expectation for a CNY800 billion gain.

     "Policy banks increased loan issuances in November to support building in

shanty areas and aiding the poor," analysts at China International Capital Corp.

(CICC) said.

     The short-term household loans grew CNY202.8 billion in November, nearly

three times the growth of CNY79.1 billion in October, due in large part to the

online shopping spree on November 11, so called Single's Day, when big online

shopping websites like Alibaba and JD.com offered large discounts and banks

increased the limits on consumers' credit cards.

     Medium- to long-term loans to households rose by CNY417.8 billion in

November, above the CNY371.0 billion gain in October.

     "The data suggest the influence of government controls on the real estate

sector seem to be taking effect more slowly than expected," analysts at BoC

said. "But it is also possible that the influence of lower mortgage demand in

[larger] Tier 1 and Tier 2 cities caused by [tighter] regulations are being

offset by new mortgage demand in [smaller] Tier 3 and Tier 4 cities."

     Short-term and medium- to long-term loans to non-financial businesses where

both stronger in November than in October. Short-term loans to non-financial

firms grew CNY19.7 billion, well above the decline of CNY1.13 billion in

October, while medium- to long-term loans rose CNY427.5 billion in November,

double the increase of CNY236.6 billion the month before.

     "The data show the government's campaign to direct money into the real

[economic] sector is having a great effect," analysts at BoC said.

     The targeted required reserve ratio cut which will become effective on

January 1, which encourage banks to issue more loans to micro and small

companies as well as the agricultural sector, also contributed to the rise of

new loans, analysts at Lianxun Securities said.

     But new lending may slow in December, analysts said.

     "Loan issuance so far this year has totalled CNY12.9 trillion, larger than

the CNY12.4 trillion last year," analysts at CICC noted. "Under macro prudential

assessment controls, [banks'] remaining loan quotas are very small and

regulators are likely to curb new loan issuance to prevent lending from growing

too much. So we expect the new loan growth in December will slow sharply."

     Growth of Total Social Financing (TSF), the broadest measure of financing

in the economy, accelerated significantly to CNY1.60 trillion from CNY1.04

trillion in October, and was also higher than the MNI survey median expectation

for a CNY1.29 trillion rise. The increase was mainly caused by high new yuan

loan issuance to the real economy, which totaled CNY1.14 trillion in November,

well above the CNY663.5 billion gain in October.

     Shadow bank financing strengthened slightly from October: entrusted loans

increased CNY28 billion in November, up from a gain of CNY4.3 billion in

October; trust loans rose CNY143.4 billion up from 101.9 billion; and

undiscounted bankers' acceptances rose CNY1.5 billion, compared with growth of 

CNY1.2 billion in October.

     "The new regulations on the asset management industry may have caused some

financial institutions to expand their shadow banking activities as much as

possible in the short-term before the new rule becomes effective," analysts at

CICC said. "But we expect expansions of these kind of products will be lower

when the new regulation becomes effective."

     Net corporate bond financing rose CNY71.6 billion in November, less than

half  the rise of CNY150.8 billion in October. But equity issuance by

non-financial enterprises on domestic stock markets rose CNY132.4 billion,

double the CNY60.1 billion in October.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MAQDS$,M$A$$$,M$Q$$$,MT$$$$]