China's October new bank loans shrink for third time this year as credit demand weakens

China's new bank lending fell in October for the third time this year, underscoring weak credit demand as households and businesses remain cautious despite Beijing's efforts to spur borrowing and revive growth.

China's new yuan loans shrank by 100 billion yuan (HK$117.62 billion) in October, having also declined in April and July, according to Reuters calculations based on data from the People's Bank of China (PBOC) on Friday.

Analysts polled by Reuters had expected October new yuan loans to reach 20 billion yuan, compared with 220 billion yuan a year earlier.

“Credit growth remained weak in October, with medium- and long-term household and corporate loans turning to net repayments,” said Zhaopeng Xing, senior China strategist at ANZ.

“China's full-year economic growth is now set to exceed 4.5 percent. The central bank's priority remains exchange-rate stability, making fresh policy measures unlikely in the near term.”

The central bank does not provide monthly breakdowns. Reuters calculated the October figures based on the bank's January-October data, compared with the January-September figure.

October is typically a weak month for new credit demand, following a quarter-end lending push with a week-long national holiday cutting working days.

Household loans, including mortgages, fell by 430 billion yuan in October after being flat in September, according to Reuters calculations. Corporate loans contracted by 160 billion yuan last month, versus an increase of 1.29 trillion yuan in September.

New yuan loans totalled 11.42 trillion yuan for the first 10 months of this year, the PBOC data showed, down from 14.97 trillion yuan in the same period last year.

Outstanding yuan loans rose 4.7 percent in October from a year earlier, a record low rate of growth and compared with the 4.8 percent pace in September. Analysts had forecast a 4.8 percent gain.

PBOC REAFFIRMS ACCOMMODATIVE STANCE

Policymakers introduced targeted credit support in late September, but the measures have yet to shore up business investment and household spending.

China's 2026 growth target of between 4.5 percent and 5.0 percent appears within reach after the economy expanded faster than expected in the third quarter, with robust exports helping offset weakness from a prolonged property downturn and soft domestic demand.

The central bank this week reiterated its stance to maintain moderately loose monetary policy and pledged to adjust monetary policy tools in a timely manner.

Broad M2 money supply in October expanded 7.1 percent from a year earlier, according to the central bank data, the slowest pace in 19 months, and below analysts' forecast of 7.2 percent in a Reuters poll. M2 expanded 7.2 percent in September.

The narrower M1 money supply grew 4.4 percent year-on-year, compared with 3.2 percent in September.

Outstanding total social financing — a broad measure of credit and liquidity — rose 7.2 percent in October from a year earlier, up from 7.1 percent in September. Any acceleration in government bond issuance could boost such financing.

“Aggregate financing still relies mainly on bond issuance, reflecting a normal structural shift in financing as the share of direct financing gradually increases,” said Zhou Hao, chief economist at Guotai Junan International.

China announced in late October the full deployment of its 800-billion-yuan policy financing tool, which analysts say could help with long-term corporate loans and entrusted loans in total social financing.

Reuters

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