BEIJING Chinese banks extended 794.6 billion yuan ($115.10 billion) in new yuan loans in November and look set to lend a record amount this year as Beijing boosts the economy to meet growth targets despite worries about the risks of prolonged debt-fueled stimulus.
Lending continued to be driven by consumer loans, primarily home mortgages, despite a series of measures rolled out by the authorities to cool surging home prices and avoid property bubbles.
Off-balance sheet lending also unexpectedly spiked in November, raising concerns of tighter liquidity if regulators crack down on the shadow banking sector, economist David Qu at ANZ said.
New bank loans rose to a record 11.6 trillion yuan in the first 11 months of the year, according to Reuters calculations based on central bank data, and have handily surpassed the levels of China's massive credit-led stimulus during the global financial crisis in 2009.
But analysts said the increase in November was partly seasonal, as outstanding yuan loan growth held steady at 13.1 percent by month-end on an annual basis, unchanged from October.
SUBDUED CORPORATE DEMAND
Corporate loan growth remained weak in November, increasing by only 165.6 billion yuan. That pointed to subdued credit demand from companies and a preference by banks to lend to households, as mortgages are usually considered higher quality assets, said Nomura economist Yang Zhao.
"With the property market cooling down, I would expect that loan growth faces downward pressure next year. I don't think there is a fundamental improvement in investment demand by corporates," said Yang.
Mid- to long-term loans to households rose to 569.2 billion yuan, or 71.2 percent of all loans, up from September's 66.5 percent, though analysts said it might take a few months to know how tighter restrictions will impact mortgages.
Analysts polled by Reuters had expected new lending to have risen to 720 billion yuan from October's 651.3 billion yuan.
Broad M2 money supply (M2) grew 11.4 percent from a year earlier, central bank data showed on Wednesday, slightly below forecasts.
Outstanding loans had been forecast to rise 13 percent, while money supply was seen up 11.5 percent.
SHADOW LENDING JUMPS
China's total social financing (TSF), a broad measure of credit and liquidity in the economy, hit the highest level since March on a big jump in shadow banking. TSF rose to 1.74 trillion yuan in November from 896.3 billion yuan in October, with about half of the increase coming from shadow lending.
"We infer from the regulatory crackdown on insurance companies that they are the latest front in the authorities' battle with credit flowing through the shadow banking system. We think the authorities are winning" ING's chief Asia economist Tim Condon wrote in a note.
The chairman of China's insurance regulator said on Tuesday that the country's insurers should not be short-term capital market "savages".
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offers, loans from trust companies and bond sales.
Trust loans increased by 162.5 billion yuan in November, the biggest increase in nearly two years, while undiscounted bankers' acceptances increased at the fastest pace since January.
"Today's surprising data will likely trigger some regulatory concerns. Shadow banking activities are expected to wane," ANZ's Qu wrote in a note.
China's central bank said recently that it will maintain ample liquidity in the economy while taking steps to prevent asset bubbles, adding that the balance between stabilizing growth and preventing bubbles has become more challenging.
The Chinese economy expanded at a steady 6.7 percent in the third quarter and looks set to hit Beijing's full-year target, fueled by stronger government spending, a red-hot property market and ample credit that are adding to its growing pile of debt.
China's overall debt has jumped to more than 250 percent of GDP from 150 percent at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say.
(Reporting by Elias Glenn and Yawen Chen; Editing by Kim Coghill and Richard Borsuk)