* Social financing data shows c.bank targets shadow banking
* C.bank says to keep policy stable with fine-tuning
* Dec new loans 482.5 bln yuan vs f'cast 600 bln yuan
* Dec M2 +13.6 pct yr/yr vs f'cast +13.8 pct
* FX reserves rise $157 bln in Q4 to $3.82 trillion
By Aileen Wang and Kevin Yao
BEIJING, Jan 15 China's new bank lending slowed
more than expected in December and broad money supply growth
also eased, highlighting the policy tightrope the central bank
must walk as it tries to contain risky debt levels without
braking the economy too hard.
There is little sign of a sharp tightening in monetary
policy, but rising money market rates and bond yields in recent
months indicate the People's Bank of China is committed to
removing excessive debt from the economy to head off potential
But analysts also believe the central bank still needs to
support economic growth, and Chinese leaders have pledged to
keep growth steady in 2014 while driving long-term reform to put
the economy on to a more sustainable footing.
"With inflationary pressures remaining modest, we expect the
PBOC to keep the current monetary policy in place," said Sun
Junwei, China economist at HSBC in Beijing, in a research note.
"Even so, we think the PBOC will still strike a balance
between mitigating financial risks on the one hand, and
stabilising growth on the other."
Chinese banks made 482.5 billion yuan ($79.9 billion) worth
of new yuan loans in December, lower than a forecast of 600
billion yuan and considerably less than the previous month's
624.6 billion yuan, central bank data showed on Wednesday.
But analysts believe the slowdown in bank lending also
reflected seasonal factors, namely the need for lenders to hold
more cash to meet year-end regulatory requirements.
Indeed, the Shanghai Securities News reported on Wednesday
that the top four state banks stepped up the pace of new lending
in January, handing over 320 billion yuan in the first 12 days
of the month, versus 270 billion yuan over the same period a
year earlier. The newspaper also cited sources saying new loans
could top 1 billion yuan in January.
Broad M2 money supply rose 13.6 percent last month from a
year earlier, the PBOC said, missing the forecast in a Reuters
poll of a 13.8 percent rise and was below a 14.2 percent rise
recorded in November.
"Slowing M2 growth in December showed the central bank's
tightening measures had started to bite," said Jiang Chao,
economist at Haitong Securities in Shanghai.
"But the money and credit data will have limited impact on
policy direction. We expect there will be no big change in
central bank's monetary policy in 2014," Jiang said.
Still, the rise in M2 surpassed the central bank's target of
13 percent, which the PBOC is seen maintaining over 2014.
The weaker-than-expected money supply and loan growth data
deepened concerns about tightening liquidity in the mainland and
China shares again underperformed most of Asia early on
Wednesday, limiting gains in Hong Kong.
The data added to fears of further cash squeezes in China's
money markets after regulators announced the resumption of
initial public offerings of shares.
With a backlog of more than 700 IPO applications and about 50
approved so far, investors have frowned at the prospect of
increased competition for limited funds with the resumption of
A-share initial public offerings after a halt of more than a
year. Larger offerings could lock up considerable amounts of
SHADOW BANKING TARGETED
New bank loans rose 8 percent in 2013 from the previous year
to 8.89 trillion yuan, the central bank data showed, a modest
slowdown from 10 percent growth in 2012.
China's total social financing (TSF), a broad measure of
liquidity in the economy, was 1.23 trillion yuan in December,
unchanged from November.
Over 2013, TSF grew 9 percent from the previous year to
17.29 trillion yuan. Growth slowed sharply from 23 percent in
2012, supporting the view that the central bank has been
targeting riskier shadow financing.
The proportion of formal bank loans in the TSF fell to just
over 50 percent in 2013 compared to over 90 percent a decade
ago, as off-balance sheet financing soars.
Sheng Songcheng, head of the statistical department at the
PBOC, told a news conference that the central bank will actively
guide shadow banking activities to support the real economy,
while working to head off potential risks.
"We will continue to implement prudent monetary policy this
year and make appropriate fine-tuning and pre-emptive
adjustments in policy to make monetary conditions not too tight
or too loose," he said.
China's foreign exchange reserves, the world's largest, rose
$157 billion in the fourth quarter to $3.82 trillion at
end-2013, indicating sustained capital inflows.
The government is due to release fourth-quarter GDP data on
Jan 20. Economists polled by Reuters forecast annual economic
growth could slow to 7.6 percent in the Q4, putting 2013 growth
on track for the weakest showing in 14 years.
Chinese leaders have pledged reasonable growth in 2014, and
sources at top government think tanks told Reuters they expect a
growth target of 7.5 percent, the same as for 2013.