REPEAT:MNI:China Oct M2 Growth at Record Low; New Loans Crater

Repeats Story Initially Transmitted at 11:16 GMT Nov 13/06:16 EST Nov 13

--Total Social Financing and Shadow Banking Also Weaken

     BEIJING (MNI) - Growth in China's M2 money supply reached a historic low in

October and new bank loans and total social financing (TSF) also grew below

expectations, according to data released by the People's Bank of China on

Monday.

     M2 rose 8.8% year-on-year to CNY165.34 trillion in October, compared with

9.2% growth in September and well below the MNI survey median expectation, which

was also 9.2%. Except for September, M2 growth has decelerated every month this

year, starting with the 11.3% growth recorded in January. 

     "Two reasons were behind October M2 growth slowing significantly," Li Qilin

and Zhong Linnan, analysts at Lianxun Securities, said on Monday. "The first is

rising fiscal deposits caused by tax payments and China government bond and

local government bond issuances. The second reason is lower household deposits

caused by the widening yield gap between the [bank] deposit rate and wealth

management product yields."

     Household deposits declined CNY805.2 billion in October, compared with a

growth of CNY1.03 trillion in September.

     Total new loans grew just CNY663.2 billion in October, compared with the

CNY1.27 trillion increase in September and expectations for CNY773 billion. It

was the lowest growth since October last year.

     "Declining loans suggests that banks' quotas for loans were limiting them

from issuing loans," Chen Jianheng, Tang Wei and Tian Xinming, analysts at China

International Capital Corp., said on Monday. "And we expect the loan data to

remain weak in November and December as banks lack deposits and loan quotas."

     Household short-term loans dropped from CNY253.7 billion in September to

CNY79.1 billion in October, caused by regulators' efforts to crack down on the

loans, which are often used in place of mortgage loans to purchase property.

     "Since late September, regulators have stepped up regulations on consumer

loans, and this caused new loans in October to go down," said Deng Haiqing,

chief economist at Jiuzhou Securities.

     Medium- to long-term loans to the household sector, mainly comprising

mortgages, grew CNY371 billion in October, compared with growth of CNY479

billion in September.

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

in the economy, fell significantly to CNY1.04 trillion in October from CNY1.82

trillion in September, and was also below the MNI survey median expectation for

a CNY1.10 trillion rise. The drop was mainly caused by low new yuan loan

issuance to the real sector, which totaled CNY663.5 billion in October, compared

with CNY1.19 trillion in September.

     Shadow bank financing weakened from September. Entrusted loans, trust loans

and undiscounted bankers' acceptances increased CNY4.3 billion, CNY101.9 billion

and CNY1.2 billion in October, compared with growth of CNY77.5 billion, CNY236.8

billion and CNY78.2 billion in September.

     "Trust loans have declined a lot from last month, and seasonal factors may

have played an important role," CICC said. "However, from our understanding,

demand for trust loans is still strong, mainly coming from the real estate

sector, and the rates on trust loans have become higher. Because of limits on

bank loans, real estate companies might seek out trust loans, causing trust

loans to remain strong."

     Net corporate bond financing rose CNY150.8 billion in October, slightly

lower than the rise of CNY156.2 billion in September.

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

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com