In a surprising turn of events, China’s credit expansion in November did not meet expectations, signaling a weaker demand for financing despite the government’s robust bond sales and stimulus measures. The People’s Bank of China released data on Friday showing that aggregate financing, which encompasses a wide array of credit, rose by 2.34 trillion yuan. This figure fell short of the 2.7 trillion yuan anticipated by economists and was less than the 2.5 trillion yuan increase seen in November of the previous year.
The amount of new loans provided by financial institutions in November was only 580 billion yuan, significantly lower than the forecasted 995 billion yuan. This slowdown comes even as China’s economy has shown modest signs of recovery in recent weeks, with improvements noted in consumption and factory activity. However, the lack of robust policies to address deflation has kept overall confidence in the economy weak.
Looking ahead, China’s leaders, including President Xi Jinping, have indicated a shift towards more aggressive stimulus measures in 2025 to invigorate growth, particularly in the consumption sector, which has lagged behind industrial growth. This shift was underscored by a policy change announced on Thursday, with Beijing moving to a “moderately loose” monetary policy for the first time in 14 years. This change suggests that the central bank plans to continue reducing interest rates and the reserve requirement ratios for banks. Some economists are predicting that these could be the deepest rate cuts the country has seen in ten years. However, similar reductions over the past two years have not successfully increased the demand for borrowing.
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