China Bank Lending Growth Expected To Slow Further Due To Reduced Stimulus And Credit Restrictions

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Chinese banks are expected to see credit growth continue to slow in 2021, as the government steps up measures to curb mortgages and consumer lending and may at some point start to slow COVID-19 stimulus measures, analysts say.

Total yuan loans outstanding by Chinese financial institutions hit a new record 172.75 billion yuan as of December 31, 2020, up 12.82% from 153.11 billion yuan a year ago , according to data from the People’s Bank of China. However, on a monthly basis, loan growth in December 2020 fell for the seventh consecutive month, which was still up 12.82% year on year.

“We expect growth rates in money supply, loans and [total social] Funding will decline moderately in 2021 from the 2020 level, “slowing the growth momentum of bank lending, said Bruce Pang, head of macro and strategic research at China Renaissance Securities (Hong Kong).

PBOC data shows that the growth rates of China’s broad money supply and total social finance at the end of 2020 were up 1.4 percentage points and 2.6 percentage points, respectively, compared to the previous year. As of December 31, 2020, the broad money supply stood at 218.680 billion yuan, up 10.1% year on year, while the total social finance outstanding increased 13.3% to reach 284.8 trillion yuan.

Among the different types of loans, loans to households continued to be the main driver of new credit, with outstanding loans in December 2020 increasing by 14.22% year-on-year. Outstanding loans to non-financial corporations and government ministries and agencies increased 12.64 percent year-on-year, while outstanding loans to non-bank financial organizations plunged 47.89 percent in December 2020, as of December 2020. seventh consecutive month of contraction.

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Rory Green, economist at TS Lombard, however, expects home loan growth to slow in 2021.

“The share of loans to [small and medium-sized enterprises is expected] to increase at the expense of lending to the real estate sector, ”Green said. He added, however, that household lending will remain the main driver of credit growth, but restrictions on mortgage lending and slowing house price increases will weigh on its growth.

Beijing has called on banks to lend more aggressively to small businesses, which are hit hard by the pandemic and the global economic downturn. In May 2020, the government asked large commercial banks to increase lending to small businesses by more than 40% in 2020 from the previous year. Data shows year-over-year growth in outstanding loans peaked at a record 13.22% in May 2020 as lenders responded to the government’s call for more loans. China, whose GDP has increased 2.3% in 2020, has become the only large economy in the world to avoid a decline in GDP in 2020.

As of February 1, US $ 1 was equivalent to 6.47 Chinese yuan.


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