China Economics Flash:New Loans Declined,While M2Accelerated

M2 growth continued to rise, to 11.6 %YoY in Oct, while its divergence with M1narrowed further — M2 growth accelerated from 11.5 %YoY in Sep to 11.6 %YoYin Oct, higher than market expectations (Citi/consensus: 11.4% YoY). Meanwhile,M0 growth sped up to 7.2% YoY in Oct, while M1 growth was subdued, at 23.9%YoY. The gap between M1 and M2 growth further narrowed to 12.3 ppt in Oct from13.2 ppt in Sep. On funding costs, the average inter-bank lending rate (weightedloans) elevated to 2.3%, suggesting some signs of further tightening in monetarypolicy conditions.

    New corporate loans declined sharply, while the tightening measures in tier 1and 2 city housing markets also dragged down household loans — Newcorporate loan growth plunged -56.6%YoY in Oct from -0.7%YoY in Sep.

    Meanwhile, long-term household loans (mainly mortgage loans) declined from RMB574.1bn in Sep to RMB 489.1bn in Oct, still accounting for 75% of total new loans.

    Total social financing (TSF) came off to RMB 896.3bn in Oct from RMB 1.72tn inSep, lower than the market expectation of RMB 1tn, owing to sluggish banks’ offbalancesheet (OBS) items and slumping bank loans. After adjusting for localgovernment debt swap, the TSF reached RMB 1.4tn (versus RMB 1.97tn in Sep).