(Yicai Global) Nov. 14 -- Important indicators of the Chinese economy such as the increases in social financing, new yuan-denominated loans, M2 broad money supply, and M1 narrow money supply failed to meet market expectations in October, the country's central bank said. New social financing was a standout underperformer with a reading almost half of that of September.

Discarding seasonal factors such as economic fluctuations and policy lag, the data released signals that the economic situation at home and abroad is grim while pressure for steady growth is rowing and subsequent monetary policy will probably remain loose, Yicai Global learned from the People's Bank of China.

M2 and M1 increased by 8 percent to CNY179.6 trillion and 2.7 percent to CNY54 trillion in October, respectively, both representing historical lows for growth, while yuan loans increased CNY697 billion (USD102.1 billion) in October, nearly the half of the CNY1.4 trillion (USD 201.3 billion) expansion last month. Social financing increased by CNY728.8 billion, far lower than the CNY2.21 trillion in the previous month, PBOC data shows.

Within the CNY697 billion increase in loans last month, personal housing mortgage loans increased by CNY563.6 billion, including CNY190.7 billion in short-term loans and CNY373 billion in medium and long-term loans, and lending to non-financial companies and government organizations based on real economy loans rose by CNY150.3 billion.

The data was expected and reflects the current economic situation, Qingming Zhao, chief economist at China Financial Futures Exchange Research Institute, told Yicai Global. The Chinese economy has been facing downward pressure since April, while credit demand has weakened and financial institutions are becoming more cautious.

The social financial increase in October was partly due to seasonal factors. The reading last year in October was CNY1 trillion, while new yuan loans were CNY663.5 billion, both lower than that of September last year. The continued slowing growth, especially the sharp drop in new loans, indicates weak financing demand in the real economy, said Sun Binbin, a fixed-income analyst at Tianfeng Securities.

"The introduction of previous policies resulted in high market expectations for October, but economic demand has been slow to react," Lian Ping, chief economist at Bank of Communications, told Yicai Global.

The company financing situation can be improved, Lian said, adding that PBOC will focus on supporting the private sector as the previous policies take effect.

China's central bank initiated steps to lower the reserve requirement ratio in early October, but the household deposits and corporate deposits have fallen and M2 has therefore declined further, said Ming Ming, chief fixed-income analyst at CITIC Securities. The large increase in fiscal deposits has been a drag on M2 also.

M1 grew slow because regulation in real estate has gradually changed from varying rules across different cities to a comprehensive ruleset, said Li Chao, a macro researcher at Huatai Securities Research Institute. Third and fourth-tier cities no longer encourage monetary resettlement. The decline in currency activation due to falling growth in commercial housing sales has led to a decrease of CNY600.4 billion in non-financial corporate deposits in October.