* Oct new loans 663.2 bln yuan vs f’cast of 780 yuan
* Oct M2 money supply up 8.8 pct y/y, vs f’cast 9.2 pct
* Oct TSF 1.04 trln yuan, vs Sept’s 1.82 trln yuan
* Deleveraging efforts seen weighing on credit expansion
* New loans on track to hit record high this year (Adds details, analyst quotes)
By Lusha Zhang and Kevin Yao
BEIJING, Nov 13 (Reuters) - 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 ($99.83 billion) in net new yuan loans in October, data from the People’s Bank of China (PBOC) showed on Monday, falling to the lowest since October last year.
Analysts polled by Reuters had predicted new yuan loans to drop to 780 billion yuan, from September’s 1.27 trillion yuan.
“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.”
Household loans, mostly mortgages, fell to 450.1 billion yuan in October from 734.9 billion yuan in September, according to Reuters calculations based on the central bank’s data.
Household loans accounted for 68 percent of total new loans last month, up from 58 percent in September.
Corporate loans dropped to 214.2 billion yuan in October from 463.5 billion yuan a month earlier.
Outstanding yuan loans at the end of October grew 13 percent from a year earlier, less than an expected 13.1 percent rise.
Despite the curbs, China’s economy remains heavily reliant on credit, and analysts agree more painful structural reforms are needed, on top of current efforts to force banks and companies to cut debt.
Chinese banks doled out 11.82 trillion yuan in new loans in the first 10 months of this year, on track to match or beat last year’s record 12.65 trillion yuan, even as the government has been trying to fend off risks.
DEBT CURBS BITE
Broad M2 money supply, which includes cash, and short- and long-term deposits, grew 8.8 percent in October from a year earlier, missing forecasts for an expansion of 9.2 percent and hitting the slowest pace since records began in 1996.
China’s central bank in June said that slowing M2 growth could be a “new normal” due to regulators’ stepped-up crackdown on risky shadow lending activities.
China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, fell to 1.04 trillion yuan ($156.54 billion) last month from 1.82 trillion yuan in September.
Goldman Sachs had expected China’s TSF, which includes off-balance sheet forms of financing such as loans from trust companies, bond sales and initial public offerings, to shrink to 1.2 trillion yuan in October.
Combined trust loans, entrusted loans and undiscounted bankers’ acceptances, which are common forms of shadow banking finance, fell to 107 billion yuan in October from 396 billion yuan in September, according to Reuters calculations.
China’s broad shadow banking activity stopped growing in the first half of 2017 and declined relative to gross domestic product for the first time in five years, weighed by a fall in issuance of higher risk instruments, a Moody’s Investors Service report showed, indicating China’s recent regulatory measures are showing effect.
Authorities have turned their attention to consumer loans, in a bid to stop them from being used to finance housing purchases. A central report last month showed much of the growth in consumer credit appears linked to the property market.
Outstanding household consumer loans surged nearly 30 percent as of end-September from a year earlier and there was also a sharp increase in property loans in the same period. ($1 = 6.6372 Chinese yuan)