China's new yuan loans unexpectedly fell in October from a year earlier and money supply rose less than forecast, damping signs the world's second-biggest economy is recovering after a seven-quarter slowdown.
The yuan strengthened 0.26 percent to 6.2291 per dollar as of 10:43 a.m. in Shanghai, the biggest gain since Sept. 28, according to the China Foreign Exchange Trade System. Photographer: Andrew Harrer/Bloomberg
Banks extended 505.2 billion yuan ($81.1 billion) of local- currency loans, down 14 percent from a year earlier, data from the Beijing-based People's Bank of China showed today. The median estimate was 590 billion yuan in a Bloomberg News survey. M2, the broadest measure of money supply, increased 14.1 percent, compared with a median forecast of 14.5 percent.
Today's reports show weaker-than-forecast credit expansion may limit a rebound in economic growth as the ruling Communist Party holds a congress in Beijing to anoint new leaders. Central bank Governor Zhou Xiaochuan said yesterday the nation is still dealing with the effects of five years of financial crisis abroad, adding to official cautions on the outlook even after gains in exports and industrial output.
"The data support the view that the economic rebound will be mild this quarter," said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, who formerly worked at the Bank for International Settlements. At the same time, the "current relatively accommodative monetary policy stance is unlikely to be loosened further," Zhu said.
Credit and money supply also have a "pattern of slower growth in the final quarter," said Zhu, whose estimates for lending and M2 were among the lowest in Bloomberg News surveys.
The Shanghai Composite Index rose 0.5 percent today, snapping five days of losses, after a Nov. 10 report showed export growth exceeded forecasts and regulators announced steps to boost investment into equities. The yuan was set for the biggest gain in six weeks, climbing to a 19-year high against the dollar. It was up 0.3 percent to 6.2292 at 4:14 p.m. in Shanghai.
Aggregate financing, an indicator designed to capture additional funding sources, including trust loans and bond and stock issuance, was 1.29 trillion yuan in October, up 63 percent from a year earlier and down from 1.65 trillion yuan in September. In the first 10 months of 2012, the gauge rose about 23 percent to 13 trillion yuan, today's data showed.
Corporate bond financing was 299.2 billion yuan in October, up 83 percent from a year earlier.