Borrower of last resort
China's disappointing credit growth print for November underscores the ongoing lack of business and household confidence.
The latest: The central bank (PBoC) released monthly credit data for November on Wednesday.
The details:
- The outstanding value of total social financing (TSF) grew 9.4% y/y in November, compared to 9.3% in October.
- Net new TSF was RMB 2.45 trillion last month, up from RMB 1.99 trillion in November 2022.
- New bank loans increased by RMB 1.09 trillion in November, down from RMB 1.23 trillion last year.
The slight improvement in credit growth was led by net government bond issuance, which reached RMB 1.15 trillion in November, up 43% y/y.
- However, it was down a little from RMB 1.56 trillion in October.
Some context: Over the last two months, local governments have issued refinancing bonds to pay down off-balance-sheet debt.
- The funds mostly go toward repaying corporate bonds, shadow banking loans, and outstanding arrears.
- Consequently, an increase in refinancing bonds should eventually translate into slower credit growth elsewhere.
November bond issuance was also likely boosted by the central government raising funds for its disaster relief and prevention program.
Get smart: Corporate and household credit demand remains weak – which comes as no surprise after November’s deflationary CPI print.
- Things will only turn around once confidence recovers.
- But authorities haven’t yet worked out how to do that.