Credit growth drops below PBoC’s red line
In October, credit growth dropped below the minimum rate set by the central bank (PBoC).
Some context: In March, PBoC Deputy Governor Xuan Changneng said that to achieve China’s economic growth target, total social financing (TSF) growth “should not be less than 8%” this year.
- At the time, TSF growth had only briefly dipped below 9%.
According to the PBoC's monthly credit data, released on Monday, outstanding total social financing (TSF) grew 7.8% y/y last month, down from 8.0% in September.
- Outstanding RMB loans grew 8.0% y/y, down slightly from 8.1% in September.
Net new TSF totaled RMB 1.40 trillion, down from RMB 1.84 trillion in October 2023.
- Banks extended RMB 298.8 billion worth of net new loans, down from RMB 483.7 billion a year earlier.
Government bond issuance continued to drive credit growth, with net new issuance reaching RMB 1.05 trillion.
- In October 2023, net new issuance was RMB 1.56 trillion.
Get smart: There aren’t any direct consequences for credit growth falling below the PBoC’s floor.
- However, the October data highlights that economic conditions have deteriorated beyond what the PBoC anticipated earlier in the year.
Get smarter: Credit demand among firms and households has been persistently weak for months.
- The problem: Beijing has yet to launch any policy initiatives that will boost credit demand in the near term.
