China’s Credit Growth Accelerated in September

(Bloomberg) -- China’s credit growth continued to accelerate in September, with an expected seasonal increase boosted by faster bond issuance in a month when the central bank acted again to guide borrowing costs lower.

Aggregate financing was 2.27 trillion yuan ($321 billion) last month, compared to about 1.98 trillion yuan in August, the People’s Bank of China said Friday. The median estimate by economists was 1.9 trillion yuan.

Key Insights

• Financial institutions offered 1.69 trillion yuan of new loans in the month, versus a projected 1.36 trillion yuan
• Broad M2 money supply grew 8.4% from a year earlier
• The PBOC moved to ease monetary conditions in September to encourage credit growth, cutting the amount of reserves banks have to hold by a full percentage-point and guiding the reference rate for loans lower
• Still, the PBOC has refrained from cutting interest rates like other major central banks, with Governor Yi Gang saying he’s “not in a rush” to add massive monetary stimulus. That’s raised doubts that even if policy does feed through to somewhat faster credit growth, it’s not enough to arrest the economy’s downward slide
• “The monetary easing implemented so far has neither been forceful nor effective,” China International Capital Corp. economist Eva Yi wrote in a note before the data. “We expect a further slowdown in growth momentum, rising deflationary pressure and a weakening labor market to push the government toward a stronger easing bias later in the year.”

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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