China’s Nov new yuan loans seen rebounding on policy support

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BEIJING — China’s new yuan loans likely rebounded in November from the previous month as the central bank seeks to bolster slowing growth in the world’s second-biggest economy, according to a Reuters poll.

Chinese banks are estimated to have issued 1.35 trillion yuan ($194.29 billion) in net new yuan loans last month, more than doubling the 615.2 billion yuan in October, according to the median estimate in the survey of 26 economists.

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That would be higher than the 1.27 trillion yuan issued in the same month a year earlier.

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The People’s Bank of China (PBOC) cut the reserve requirement ratio for banks by 25 basis points (bps) effective from Dec. 5, to free up more funds for lending.

This is the second such move this year, releasing about 500 billion yuan in long-term liquidity to prop up a faltering economy hit by record COVID-19 cases and lockdowns.

China on Wednesday announced sweeping changes to its tough anti-COVID regime, loosening rules that curbed the spread of the virus but sparked protests and hobbled economic activity. It also recently announced a slew of measures to ease a funding crisis for real estate developers that has weighed heavily on the property sector.

But economists say the road to recovery may be long and bumpy, especially if new infections surge and global demand continues to weaken.

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In 2023, the government will focus on stabilizing growth, employment and prices, while preventing and defusing major systemic risks, the Politburo, the country’s top-decision making body, said this week.

China’s economy grew just 3% in the first three quarters of this year, but an annual meeting next week of top policymakers is expected to aim higher.

Government advisers told Reuters last month they would recommend 2023 growth targets ranging from 4.5% to 5.5%, while a central bank adviser said last month that China should set a target no lower than 5%.

Outstanding yuan loans were expected to grow by 11.1% in November from a year earlier, the same pace as in October, the poll showed. Broad M2 money supply growth in November was seen at 11.7%, down from 11.8% in October.

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Local governments issued a net 3.98 trillion yuan in special bonds in the first 10 months, the finance ministry data have shown, as authorities accelerated special bond issuance for infrastructure to prop up the economy.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF rose 10.3% in October, down from 10.6% in September.

In November, TSF is expected to rise to 2.1 trillion yuan from 907.9 billion yuan in October. ($1 = 6.9485 Chinese yuan renminbi) (Reporting by Judy Hua and Ryan Woo; Editing by Kim Coghill)