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Record High Of New Loans In China In 2021 At $3.13 Trln

Record High Of New Loans In China In 2021 At $3.13 Trln
Fresh bank lending for December in China declined more than predicted from the previous month, but credit for the entire year 2021 hit a new high as the central bank gradually increases policy assistance to cushion the weakening economy.
According to data provided by the People's Bank of China (PBOC) on Wednesday, Chinese banks extended 1.13 trillion yuan ($177.56 billion) in new yuan loans in December, down from 1.27 trillion yuan in November and falling short of analysts' forecasts.
New yuan loans were expected to dip to 1.25 trillion yuan in December, according to analysts polled by Reuters. The total was also lower than the previous year's figure of 1.27 trillion yuan.
However, new bank lending reached a new high of 19.95 trillion yuan for the year, up 1.6 per cent compared to the previous high of 19.63 trillion yuan set in 2020, and comparable to more than the gross domestic product of the United Kingdom.
"December credit data was slightly weaker than expected, but financing for the real economy has been improving," said Luo Yunfeng, an analyst at Merchants Securities.
2021 marked a  start for China's economy as economic activity recovered from a pandemic induced hit in the previous year. But since then it has slowed in recent months due to a downturn in the country's property market, restrictions imposed to curb industrial pollution, and strict Covid-19 restrictions, all of which have harmed consumer confidence and spending.

Local governments' spending has been impacted by policymakers' efforts to control debt concerns.
The central bank reduced the reserve requirement ratio (RRR) for banks on Dec. 15, the second such step in 2021, to boost business activity by freeing 1.2 trillion yuan in long-term cash.
To help the rural sector and small businesses, the central bank decreased the rates on its lending facility by 25 basis points (bps).
Most experts expect the RRR to be trimmed again this year, with some even predicting a small policy rate reduction if activity continues to slow. More significant rate cuts are unlikely, especially because the US Federal Reserve appears to be on the verge of rising interest rates, thereby causing capital outflows from emerging countries. find out more
Despite this, the property downturn is projected to last into the first half of this year, with the recent local spread of the highly contagious Omicron strain offering a new problem.
In 2022, China will maintain its proactive fiscal policy and careful monetary policy. In 2022, the Politburo, the country's top decision-making body, stated that economic activities will be kept within a reasonable range.
"Debt to GDP was aggressively reduced by 10% points in 2021, but with growth decelerating to below policymakers' comfort zone, policy makers have clearly pivoted to an outright easing mode," analysts at Morgan Stanley said in a note earlier this week.
Other China experts said the recent statistics showed indicators that the credit cycle was weakening and could be turning.
According to central bank data, the broad M2 money supply increased 9.0 percent from a year ago, a nine-month high and higher than the 8.7 percent expected in a Reuters poll. In November, M2 increased by 8.5 percent over the previous month.
Outstanding yuan loans increased 11.6 per cent year over year in December, the smallest growth since May 2002, compared to 11.7 per cent in November. Analysts had predicted an 11.7 per cent increase.

Christopher J. Mitchell

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