China new bank loans hit record in 2020 despite fall in December

BEIJING: New bank lending in China fell in December from the previous month, but lending for all of 2020 hit a record, as the central bank kept its policy stance accommodative during the pandemic.

Chinese banks made 1.26 trillion yuan ($194.98 billion) in new loans in December, down from 1.43 trillion yuan in November but exceeding analyst expectations, according to data released by the People’s Bank of China (PBOC) on Tuesday.

Analysts polled by Reuters had predicted new yuan loans would fall to 1.22 trillion yuan in December.

New bank lending rose to a record 19.63 trillion yuan in 2020, up 16.8% from 16.81 trillion yuan in 2019 - the previous record.

China’s central bank governor, Yi Gang, said last week it would prioritise stable monetary policy in 2021, and any steps to exit stimulus measures would have little impact on the economy, Xinhua news agency reported.

The PBOC will scale back support for the economy in 2021 and cool credit growth, but fears of derailing a recovery from a pandemic-induced slump and debt defaults are likely to prevent it from tightening anytime soon, policy sources said.

The central bank is poised to keep its benchmark lending rate unchanged in coming months while steering a steady slowdown in credit expansion in 2021, said the three sources.

Broad M2 money supply in December grew 10.1% from a year earlier, below estimates of 10.5% forecast in the Reuters poll. It rose 10.7% in November.

Outstanding yuan loans grew 12.8% from a year earlier compared with 12.8% growth in November. Analysts had expected 12.8% growth.

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 13.3% in December from 13.6% in November. TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. In December, TSF fell to 1.72 trillion yuan from 2.13 trillion yuan in November. Analysts polled by Reuters had expected December TSF of 2.20 trillion yuan.