China's December bank lending seen rising on government stimulus measures

New bank loans in China probably rose in December from the month before, a Reuters poll showed on Friday, as government stimulus measures slowly began to lift appetite for credit long suppressed by a housing slump.

Chinese banks are expected to have issued around 800 billion yuan in net new yuan loans last month, according to the average of 19 economists' estimates in a Reuters poll, compared to 390 billion yuan in November.

The poll, however, showed that loan expectations were below the 990 billion yuan issued in December 2024.

The government is expected to release loans and money supply data between December 10 and December 15.

The Chinese economy could be seeing the early benefits from a 500 billion yuan policy-based financial tool that Beijing introduced in September to supplement project capital.

"The RMB500bn policy-financing tool could have started to pass through to new RMB loans, especially as earlier released PMIs indicated improving construction demand," Citi Research analysts said in a note.

Chinese officials said the instrument was fully deployed in late October to finance more than 2,300 projects with a total investment of around 7 trillion yuan.

China's factory activity unexpectedly grew in December, snapping a record eight straight months of decline, lifted by a rise in pre-holiday orders.

A separate also showed marginal expansion in activity last month, driven by stronger production and domestic demand.

But analysts expect slower loan growth to persist for months.

"With the government unlikely to widen its budget deficit target next year, growth in government bond issuance is set to slow further,' Capital Economics' Leah Fahy said in a note last month.

Beijing has been pushing for a consumption boost to steer the world's second-largest economy away from its reliance on exports and investments, and has promised more stimulus this year.

Despite exports holding up, on, persistent deflation and a prolonged crisis in the property sector.

China's President Xi Jinping pledged at the end of 2025 "more proactive" macroeconomic policies, which could ease worries over the slowdown seen during the second half of last year.

The broader M2 money supply probably grew 8.0 percent in December from a year earlier, matching the pace in November, the poll showed.

Economists estimated outstanding yuan loans grew 6.3 percent in December from a year before, slowing from 6.4 percent growth the previous month.

Total social financing - a broad measure of credit and liquidity - probably fell to 2 trillion yuan in December from 2.49 trillion yuan in November, the poll showed. Any acceleration in government bond issuance could boost such financing.

The TSF measure includes off-balance-sheet forms of financing beyond conventional bank lending, such as initial public offerings, bond sales and loans from trust companies.

REUTERS