Statistics indicate ongoing monetary easing to offset economic headwinds
China's financial institutions accelerated lending to support economic growth in November, which boosted bank loans beyond the expected level, according to data reported by the central bank on Tuesday.
The country newly issued yuan-denominated loans of 1.25 trillion yuan ($181.12 billion), more than the expected 1.2 trillion yuan and 697 billion yuan in October, the People's Bank of China, the nation's central bank, said in a statement on its website.
Total social financing, a broader measure of financial channels including trust loans, increased by 1.52 trillion yuan in November, compared with 728 billion yuan in October, the central bank said.
The central bank also reported that M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 8 percent year-on-year, unchanged from the growth rate a month earlier.
The statistics reflected ongoing monetary easing, started from the second half, to offset economic headwinds, especially in the first half of next year.
The priority of Chinese monetary policy has shifted to strengthening corporate financing, including to better use the capital market, to boost sentiment in the private sector and offset headwinds from an economic slowdown, they said.
Possible policy tools include bank reserve requirement ratio cuts to inject liquidity to keep interbank rates at a low level and maintain the stability of government and corporate bond yields.
"We expect a total of 250 basis points in RRR cuts before the end of 2019," said Lu Ting, chief economist in China with Nomura Securities.
Increasing commercial bank loan quotas and encouraging banks to increase lending to the private sector may also continue to support the real economy, he said.
Nicholas Zhu, a Moody's vicepresident and senior analyst, said that the recent shift in China's monetary policy stance will support broad system liquidity and the general repayment capacity among borrowers.
"But it may also slow the nascent decline in system leverage over the past year," he added.
The authority's monetary policy stance shifted from neutral to easing in the mid-year. As of early December, the central bank has cut the RRR four times for a total of 250 basis points. Benchmark deposit and lending rates have been left unchanged since October 2015.
People's Bank of China Governor Yi Gang said earlier that China's monetary policy must be fine-tuned in a flexible and moderate way to meet the changing economic conditions and to counter-balance the cyclical pressures on the economy.
"To maintain economic and financial stability is always the important target (of monetary policy)," said the central bank chief, who also vowed to continually deepen financial reform and further open the financial markets to foreign investors.