China Bank Lending Declines More Than Expected

China's bank lending declined more than expected in December, data from the People's Bank of China showed on Wednesday.

In December, banks extended CNY 1.13 trillion in new loans compared to CNY 1.27 trillion lending in November. Economists had forecast lending to fall marginally to CNY 1.25 trillion.

Aggregate financing decreased to CNY 2.37 trillion in December and also remained below the economists' forecast of CNY 2.45 trillion.

The figures are surprising given the PBoC, China's central bank, cut the reserve requirement ratio by 0.5 percentage points last month, and interest rates by 5 basis points, Iris Pang, an economist at Capital Economics, said.

For the corporate sector, demand for loans is mostly affected by real estate and companies along the supply chain, the economist noted.

Sheana Yue and Julian Evans-Pritchard, economists at Capital Economics, said credit growth will probably continue to edge up in the coming months given intensifying efforts to push down borrowing costs and boost lending.

That said, policymakers still appear keen to balance their desire to soften the economic downturn with their concerns over high debt levels, they added.

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