(Yicai) Dec. 15 -- Chinese households’ loan demand weakened last month, with corporate financing also remaining low, mainly driven by bill financing and short-term loans.

China added CNY390 billion (USD55.3 billion) yuan-denominated loans in November, down from CNY580 billion a year earlier, according to data released by the People’s Bank of China on Dec. 12. Chief economists polled by Yicai had earlier predicted new yuan loans to have reached CNY679.1 billion.

Loans to households decreased by CNY206.3 billion last month from a year earlier, compared with an increase of CNY270 billion in the same period last year. Among them, short-term loans shrank by CNY215.8 billion, versus a CNY37 billion (USD5.2 billion) decline a year ago, and medium- and long-term loans increased by CNY10 billion, down from a CNY300 billion growth.

The household credit data reflect weak household consumption demand, as well as the ongoing adjustments in the real estate industry.

Despite the boost from the Double 11 Shopping Festival, households’ short-term loans remained under pressure, mainly because of a high base last year for the introduction of consumption subsidy policies, said Wen Bin, chief economist at China Minsheng Bank. Moreover, Double 11 has been starting earlier these past years, preemptively tapping into credit demand, he added.

The second-hand housing market is still in a phase of “trading price for volume,” as stabilizing prices and reversing the downward trend remain the focus of policies, Wen noted. Affected by insufficient aggregate demand and a high base a year earlier, households’ medium-to-long-term loans recorded a significant decline in November.

China’s loans to non-financial enterprises and public institutions rose by CNY610 billion last month from the same period last year, versus a CNY250 billion increase a year earlier, according to the PBOC data.

Of them, short-term loans climbed by CNY100 billion in November, compared with a CNY10 billion decline a year ago, mainly thanks to a boost from a CNY334.2 billion surge in bill financing. Medium-to-long-term corporate loans jumped by CNY170 billion, down from a CNY210 billion increase in the period.

The continued slowdown in medium-to-long-term corporate loans was mainly due to the mounting downward economic pressure since the fourth quarter, which led to a sharp decline in investment growth and restrained credit demand among real economy enterprises, said Wang Qing, chief macro analyst at Dongfang Jincheng.

Meanwhile, corporate bond financing maintained year-on-year growth in November, which may have substituted loan demand and exerted a certain drag on the growth of new medium-to-long-term corporate loans, Wang explained.

Chinese yuan deposits increased by CNY1.41 trillion (USD200 billion) last month from a year earlier, versus a CNY2.17 trillion growth in the same period last year, per the PBOC data. Among them, household deposits rose by CNY670 billion and non-financial corporate deposits climbed by CNY645.3 billion, which compare with growths of CNY790 billion and CNY740 billion, respectively, a year ago.

Fiscal deposits decreased by CNY50 billion in November from the same period last year, versus a CNY140 billion increase a year earlier. Non-bank financial institution deposits increased by CNY80 billion, marking the first time this year that their year-on-year growth declines.

“Household purchases of financial assets boosted non-bank financial institution deposits,” said Zhang Yu, chief macro analyst at Huachuang Securities. “When the growth rate of non-bank deposits outpaces that of household deposits, it usually indicates elevated risk appetite among households, accompanied by a surge in equity market trading volume.”

This change reflects setbacks in the improvement of financial market liquidity, Zhang pointed out. Affected by the increased volatility in the Shanghai Composite Index since October, households’ risk appetite has turned cautious, with November credit data likely to exert pressure on equity market trading volume, he added.

Changes in the deposit and loan segments have directly impacted the structure of money supply. The gap between M2, which covers cash in circulation and all deposits, and M1, which covers cash in circulation and non-bank and non-government deposits, widened to 3.1 percent last month, indicating that corporate financing demand in the real economy remains weak.

M2 grew 8 percent as of Nov. 30 from a year earlier, compared with an 8.2 percent increase in the same period last year. M1 rose 4.9 percent, down from 6.2 percent in the period.

Given the economic conditions that China faces now and will face next year, the financial demand pattern of “weak households, growing enterprises, and robust government” will likely persist for one or two more quarters, said Wang Yunjin, chief financial researcher at the Chief Industry Research Institute of Guangkai Securities.

New yuan loans are expected to reach around CNY1.5 trillion in the fourth quarter, with new social financing likely to exceed CNY6.1 trillion, Wang Yunjin predicted.

Editor: Futura Costaglione