(Yicai Global) Dec. 13 -- China’s financial data was weak last month, with new social financing falling short of market expectations. But the increase in medium- and long-term credit loans was a bright spot, and analysts suggest that the country should make greater policy efforts to steady economic growth.

New social financing totaled CNY1.99 trillion (USD285.2 billion) in November, down CNY610.9 billion (USD87.6 billion) from a year earlier, according to data released by the People’s Bank of China yesterday. That was less than the CNY2.1 trillion median forecast of chief economists polled by Yicai Global.

The decline was more than expectated, indicating sporadic Covid-19 outbreaks dragged down demand and affected production and supply, said Zhou Maohua, a researcher in China Everbright Bank’s financial markets department.

The real economy’s financing needs were weak as companies lacked any incentive to to replenish inventory and expand in addition to the sluggish real estate market, he noted. Another reason for the drop was that local governments wrapped up their special bond sales for this year ahead of schedule.

“Benchmark interest rates for bonds rose rapidly due to big regulatory adjustments in the middle of and late last month, inflating companies’ financing costs, and many firms cancelled bond issuance, so direct financing by companies last month slumped by CNY341 billion from a year earlier,” said Wen Bin, chief economist at China Minsheng Bank.

New Lending

New yuan-denominated loans tallied CNY1.21 trillion in November, down CNY59.6 billion from a year ago. New loans to companies and public institutions amounted to CNY883.7 billion, including a decrease of CNY24.1 billion in short-term loans and an increase of CNY736.7 billion in medium- and long-term lending.

Lending to corporations, especially medium- and long-term loans, will continue to climb thanks to the cut in the reserve requirement ratio, low base number, and the development of key areas such as infrastructure, manufacturing, and real estate, Wen noted.

“New loans to companies jumped last month from a year earlier, indicating that China’s bailout and growth-stabilizing policies were taking effect,” Zhou said. “Policy support for credit loans to key infrastructure projects, micro and small private companies, and emerging areas, rose significantly.”

Lending to households implied consumption was still weak, but new loans to households improved significantly on a monthly basis. New loans totaled CNY262.7 billion in November, down by CNY471 billion from a year ago, but up by CNY280.7 billion from the previous month, the data showed.

Broad Money

Broad M2 money supply jumped 12.4 percent from a year ago to CNY264.7 trillion in November, a bigger increase than October’s 11.8 percent, attracting much attention.

Wang Qing, chief macro analyst with Golden Credit Rating International, gave two reasons for the unexpected rebound in M2 growth: first, the base number of the same period last year was low, and second, the redemption of wealth management products in the month swelled household deposits.

With the accelerated implementation of China’s steady growth policy, analysts generally expect a quick market turnaround since last month, but recurrent Covid-19 outbreaks and unstable expectations continue to disrupt credit easing.

Consequently, China should make greater policy efforts to stabilize growth and consolidate the foundations for the economy’s recovery, they added.

Editor: Peter Thomas