China’s credit data show signs deleveraging is starting to bite

by BLOOMBERG

BEIJINGChina’s efforts to curb credit growth are increasingly showing signs of working.

Aggregate financing stood at 1.04 trillion yuan (RM655.2 billion) in October, the People’s Bank of China said yesterday, versus an estimated 1.1 trillion yuan in a Bloomberg survey.

New yuan loans stood at 663.2 billion yuan, versus a projected 783 billion yuan.

The broad M2 money supply rose 8.8%, compared to a projected 9.2%. Broad money supply growth was the slowest since at least January 1996; both credit indicators fell to the lowest since October last year.

Credit growth typically slows toward the end of the year.

Top leaders signalled a shift away from stringent growth targets at a key twice-a-decade Party Congress last month, and the central bank chief has warned of the risk of a sudden collapse in asset prices due to over-optimism.

A faster than anticipated slowing of credit may present a risk to the economic outlook next year, at a time when China is seeking to open its financial system to outside investors further.

“Money supply expansion is slowing down, signalling efforts to deleverage,” said Ding Shuang, chief China economist at Standard Chartered plc in Hong Kong. “Off-balance-sheet loans are moving onto balance sheets, and growth is decent after adjusting for the season.”

“Credit growth slowed in the first month after the party congress, signalling policymakers are determined to cut excessive leverage as they’re free of the economic growth burden,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. “With curbs on home mortgages and shadow banking continuing, credit growth will remain slow.” — Bloomberg