Courtesy of Also Sprach Analyst.
Chinese banks might have extended around RMB600 of new loans in September, with the most optimistic forecast of RMB750 billion, according to Shanghai Securities Journal.
On top of that, some expect that the composition of new loans will improve, with larger proportion of loans going into medium- to long-term loans, which has not been the case for quite a while. Many, including me, suspect that the large proportion of loans allocated to the short-term did not bode very well for fixed asset investment, which is a bit of a key driver for growth, and will be relied on as far as growth stabilisation is concerned.
Although the report tries to paint a very positive picture, we are not sure how positive this actually is. For a start, RMB600 billion consensus is not even an improvement from August, when net new loans was RMB703.9 billion. In fact, it will be a deterioration, unless you believe in the high-end of estimate. But even at the high end of the expectation, RMB750 billion would represent an improvement which is merely consistently to the seasonality, not necessarily a real improvement.
On top of that, Chinese banks are also having periodic liquidity crunches in recent months, which required PBOC’s massive injections of money to provide temporary liquidity support. I am left wondering how a banking system actually lends more money when they themselves are experiencing liquidity crunches every other week and apparently unwilling to lend to each other.