December 9, 2020

BEIJING (Reuters) – China’s new bank loans are expected to rebound in November from a one-year low the previous month as the central bank maintains policy support for the economy amid the global pandemic.

Chinese banks are estimated to have issued 1.40 trillion yuan ($214.53 billion) in net new yuan loans last month, compared with 689.8 billion yuan in October – the lowest in a year, the median estimate in a Reuters survey of 30 economists found.

That level would be slightly higher than 1.39 trillion yuan in new loans a year earlier.

Lending in China usually rebounds in November from a seasonal retreat in October, when a week-long National Day holiday falls.

Banks have already doled out 16.95 trillion yuan in new loans in the first 10 months, surpassing an annual record of 16.81 trillion yuan in 2019.

The central bank has rolled out a raft of emergency easing measures since February to cushion the economic blow from the pandemic and tough measures to contain it.

But with economic activity rebounding strongly, analysts like those at Nomura believe policymakers have shifted from a “wartime mode” to a “wait and see” approach.

Markets are wondering when authorities may start to withdraw stimulus and slow credit growth, but most analysts believe such a process would be gradual as long as the global economic outlook remains shaky.

China is unlikely to tighten its monetary policy soon, even though an economic recovery could gain steam in coming months, Xu Xianchun, a former vice head of the National Bureau of Statistics, told Reuters earlier this week.

Broad M2 money supply in November was seen growing by 10.5% year-on-year, the same pace as the previous month.

Annual outstanding yuan loans were expected to grow by 12.9% for November, the same as for October.

Beijing has been relying more on fiscal stimulus to weather the downturn, cutting taxes and allowing local governments to issue more bonds to fund infrastructure projects.

But debt risks are rising for local governments as they face increasing repayment pressures, a finance ministry official told a forum on Tuesday.

Recent bond defaults by companies with government links have rattled the country’s credit markets, pushing up borrowing costs for some firms and prompting others to delay or cancel issuance plans.

Still, analysts forecast that total social financing (TSF), a broad measure of credit and liquidity, jumped to 2.08 trillion yuan in November from 1.42 trillion yuan in October.

China’s policymakers are close to setting an average annual economic growth target of around 5% for the next five years, at the lower end of ranges previously considered as global risks cloud the outlook, policy sources have said.

(Reporting by Judy Hua and Kevin Yao; Editing by Kim Coghill)

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