There was an increase in Chinese new loans of CNY1,220bn for September following an increase of CNY949bn the previous month with the increase also above consensus forecasts for an increase of around CNY1,000bn.
There was also an increase in total social financing of CNY1,720bn from CNY1,470bn the previous month and the strongest figure for three months. There will be short-term optimism surrounding the growth outlook, offset by longer-term credit fears.
The annual increase in M2 money supply growth increased to 11.5% from 11.4% previously, although this was marginally below expectations.
There was an increase in new housing loans to individuals of CNY476bn for the month from CNY270bn in September 2015 with an increase of CNY3.63trn for the first nine months of 2016, which accounted for 46% of total loans.
The stronger than expected data for new loans will increase expectations of solid near-term growth and will also tend to lessen the potential for any People’s Bank of China (PBOC) monetary easing, although expectations of any move are already low.
There is some evidence that the increase in loans to local government in the context of debt swaps is easing. Underlying fears surrounding excess credit will continue given a credit/GDP ratio of 250%.
The strong increase in new credit growth to the housing sector will increase fears surrounding excessive credit growth and the risks of financial instability within the housing sector.
Nevertheless, the data overall will tend to underpin risk conditions in the short term with hopes for solid growth data.