In November, Chinese banks distributed CNY 1210 billion in new yuan loans, up from October’s 615 billion figure but undershooting market expectations. Meanwhile, the stock of total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—increased 10.0% in the month (October: 10.3% yoy).
November’s underwhelming figures were the result of soft credit demand, due to pandemic restrictions and the property downturn. This is despite access to credit being eased by the authorities in recent months through cuts to interest rates and extra support to the housing sector.
Near-term credit demand will likely stay weak due to uncertainty generated by the country’s navigation away from its zero-tolerance Covid-19 stance. Regarding policy rates, the Consensus is for only marginal easing going forward. While mild price pressures and the recent yuan strengthening provide some leeway to cut rates, the government’s decision to loosen pandemic restrictions reduces the need for further easing.