(Yicai Global) Nov. 14 -- Industry insiders still believe that China’s central bank will likely lower the reserve requirement ratio before the end of December, for what would be the third cut of the year.

The People’s Bank of China is expected to cut the RRR for financial institutions this year because of strong demand for cost reduction, according to Ming Ming, chief economist at Citic Securities.

The PBOC lowered the RRR by 25 basis points to 7.4 percent on Sept. 15, following another 25-bps cut on March 27.

Before the end of the year, there will be more capital disturbance factors, so there will be room to strengthen cross-cycle adjustments, enhance the weak links of the economy, and focus on supporting emerging areas, said Zhou Maohua, macro researcher at the financial market department of Everbright Bank. Therefore, the PBOC may cut the RRR and introduce structural tools around the end of the year, Zhou added.

China’s newly added social financing rose CNY910.8 billion (USD125 billion) to CNY1.85 trillion (USD253.8 billion) in October from the previous month, according to data released yesterday by the PBOC.

The figure is in line with the expectations of chief economists polled earlier by Yicai. They predicted social financing to range between CNY1.32 trillion and CNY2.2 trillion last month.

Social financing grew in October because of the intensive issuance of special refinancing bonds, coupled with the low base effect of last year, said Wen Bin, chief economist at China Minsheng Bank. The additional issuance of trillions of government bonds is expected to continue strengthening support for social financing, he added.

New yuan-denominated loans jumped CNY105.8 billion to CNY738.4 billion last month from a year earlier, PBOC data also showed. Among them, household loans fell by CNY34.6 billion (USD184.6 million) and short-term loans plunged CNY105.3 billion, while medium- and long-term loans rose CNY70.7 billion.

Long-term new loans’ rise reflects, to a certain extent, the recovery of real estate sales and the gradual improvement of residents’ expectations for the property market, said Zhou. As the economy maintains a reviving trend, the effect of policies to stabilize the real estate market will likely be more visible, and its recovery may remain optimistic but change pace, he noted.

The October results show that the adjustments and optimizations of real estate policies in the early stage did work, and residential housing consumption did stabilize to some extent, according to Dong Ximiao, chief researcher at Zhaolian.

Meanwhile, the gap between M2, a broad measure of money supply that covers cash in circulation and all deposits, and M1, a narrow measure of money supply that covers circulating cash and non-bank and non-government deposits, was 8.4 percentage points as of the end of October, up 0.2 point from the end of September and 3.9 points from a year earlier.

Industry insiders believe that the widening gap reflects that the confidence of companies and residents still needs to be restored.

Editor: Futura Costaglione