China's new loans fell more than expected in October to their lowest in a year as banks tightened mortgage lending and corporates continued to shun bank loans, amid a continuing clampdown on risky shadow lending activities.
Chinese authorities are walking a fine line by seeking to contain riskier types of financing and slowing an explosive build-up in debt without stunting economic growth.
Banks extended 663.2 billion yuan (HK$78.21 billion) in net new yuan loans in October, data from the People's Bank of China showed yesterday, falling to the lowest since October last year.
"The upshot is that tighter monetary conditions have driven a meaningful slowdown in credit growth in recent quarters and we think the economy is set to feel the negative effects of this before long," said Julian Evans-Pritchard, China economist at Capital Economics.
"As such, we believe the PBOC will refrain from pushing up market rates much further despite the official rhetoric on deleveraging. If anything, we think monetary conditions are more likely to be loosened rather than tightened during the coming year."