China’s lending jumped by more than analysts forecast in October, signaling that the government may be loosening loan quotas to support growth in the world’s second-biggest economy.
Local-currency lending was 586.8 billion yuan ($92.5 billion), the People’s Bank of China said in a statement on its website today. That was the highest since June and exceeded all 18 estimates in a Bloomberg News survey that had a median forecast of 500 billion yuan. M2, a measure of money supply, rose 12.9 percent.
Chinese officials aim to sustain the nation’s expansion as the property market cools and Europe’s debt crisis hits exports. Mizuho Securities Asia Ltd. and Capital Economics Ltd. predict a rebound in lending this quarter after Premier Wen Jiabao said economic policies will be “fine-tuned” as needed and pledged more funding for smaller companies.
“This is a meaningful pickup in new loans which suggests selective easing has already started,” said Qu Hongbin, a Hong Kong-based economist with HSBC Holdings Plc. “This should help stabilize growth with small and medium-sized enterprises and increase credit support for ongoing infrastructure projects. China has no risk of a hard landing.”
The government aims to sustain the momentum of an economy that grew 9.1 percent in the third quarter after reports this week showed exports increased at the slowest pace in two years and industrial output rose the least in a year. October home sales fell 25 percent from September, government data showed.
Biggest Banks
The nation’s four biggest state-owned banks including China Construction Bank Corp. and Bank of China Ltd. (3988) extended more than a third of their 240 billion yuan of October loans in the last two days of the month, indicating credit curbs may have been relaxed, the 21st Century Business Herald reported today. It cited an unidentified person familiar with the situation.
“Lending needs to be eased in the fourth quarter after the over-tightening of credit conditions in the third quarter,” said Wang Tao, a Hong Kong-based economist with UBS AG. She estimates new loans in each of the next two months of 500 billion yuan to 550 billion yuan.
That would bring the total to about 7.3 trillion yuan this year, Wang said, compared with 7.95 trillion yuan last year.
China Indicator Shows Economy Maintaining Momentum, Conference Board Says
A Chinese leading indicator rose, suggesting the world’s second-biggest economy is weathering moderating export growth and a government campaign to curb consumer and property prices.
The index increased 0.4 percent to 160.2 in September, The Conference Board said on its website today, citing a preliminary reading. The gauge is designed to capture prospects over the coming six months. August’s index was revised to a 0.6 percent gain from a previous 0.5 percent increase.
The People’s Bank of China said yesterday growth is slowing as a result of the government’s macroeconomic policies and that the economy’s momentum remains “strong.” The comments indicate the central bank will implement “selective easing” such as cutting lenders’ reserve requirements rather than any “across- the-board” loosening, Credit Suisse AG said in a report today.
The leading index “is still expanding strongly,” confirming China’s “soft-landing story,” Andrew Polk, a Beijing-based economist at The Conference Board, said on Bloomberg Television. The European debt crisis remains the nation’s biggest risk, and “if that takes a drastic turn for the worse, then we’re looking at some pretty serious hit in China’s export market,” he said.
The benchmark Shanghai Composite Index rose 0.1 percent as of 1:17 p.m. local time today. The gauge has lost 12 percent this year amid government’s policy tightening and worsening global outlook.
U.K. Consumer Confidence at Record Low
U.K. consumer confidence fell to a record low in October as Europe’s debt crisis and the unemployment outlook worsened, Nationwide Building Society said.
An index of sentiment dropped 9 points from the previous month to 36, the lowest since the index began in May 2004, the Swindon, England-based customer-owned lender said in an e-mailed report today. A gauge of consumers’ expectations fell 14 points to a record low of 48.
Bank of England Governor Mervyn King said yesterday the U.K. economy faces a “markedly weaker” outlook amid persistent danger from turmoil in the euro area. The bank’s forecasts show inflation is more likely than not to be below its 2 percent target in two years, suggesting policy makers may have to increase their bond-purchase plan again after a 75 billion-pound ($118 billion) expansion in October.
“A wave of disappointing economic news and home and ongoing uncertainty surrounding the euro crisis has dealt a heavy blow to sentiment,” Robert Gardner, chief economist at Nationwide, said in the report. The increase in bond purchases “should help to stimulate the economy in the months ahead.”
A gauge of Britons’ assessment of their present situation fell 3 points to 18, Nationwide said. An index of shoppers’ views on whether it’s a good time to make a major purchase, such as a house or car, dropped 2 points to 75.
Greece Turns to Budget After Winning Confidence Vote
Papademos won a confidence vote in the parliament in Athens, receiving a mandate to push through budget measures necessary to secure financing designed to avert a collapse of the economy and keep Greece in the euro.
Lucas Papademos, Greece's prime minister, speaks during a confidence vote at the Greek parliament in Athens, Greece, on Wednesday, Nov. 16, 2011. Papademos won a confidence vote in the parliament in Athens, receiving a mandate to push through budget measures necessary to secure financing designed to avert a collapse of the economy and keep Greece in the euro. Photographer: Kostas Tsironis/Bloomberg
Lucas Papademos, Greece's prime minister, waits to speak during a confidence vote at the Greek parliament in Athens on Nov. 16, 2011. Photographer: Kostas Tsironis/Bloomberg
Greek Prime Minister Lucas Papademos turns his attention today to finalizing next year’s budget, tackling a key demand set for the country to receive international financing a day after he won a confidence vote.
Finance Minister Evangelos Venizelos will present the 2012 spending plan to the new cabinet for approval before it’s submitted to parliament for discussion by lawmakers, which he said could be this week. Demonstrators at the same time will gather in Athens to commemorate a student uprising today.
“The policy of fiscal consolidation is necessary after the mistakes of the past several years to create the foundations for a new type of sustainable development,” Papademos told parliament yesterday. “The road is long and requires persistent effort and implies large adjustment costs.”
Papademos, a former European Central Bank vice president, won a three-month mandate to implement budget measures and ensure a bailout of 130 billion euros ($176 billion) agreed to with euro partners on Oct. 26. The first priority is to get a loan payment of 8 billion euros by the middle of next month to avert a collapse of the financial system.
A total of 255 lawmakers in the 300-strong chamber supported the confidence motion and 38 were against, Parliament Speaker Filippos Petsalnikos said yesterday.
“Participating in the euro area means benefits and facilitates the adjustment of the economy, if of course the appropriate economic policy is followed,” Papademos said before the vote. “This is the truth, not blackmail.”
India’s Debt at 70% of GDP Is ‘Constraint’ to Higher Rating, Moody’s Says
India’s public debt at 70 percent of its gross domestic product is preventing Asia’s third-biggest economy from securing an investment-grade rating, Moody’s Investors Service said.
The nation’s fiscal deficit and “the debt burden, which is high relative to similarly rated countries,” are among the constraints, Atsi Sheth, a sovereign analyst at Moody’s, said in a telephone interview from Mumbai yesterday. “For the ratings to be improved, we will have to be comfortable that India’s government debt is at a level that can be sustained over the medium term.”
India’s finance ministry pitched for a higher rating in a meeting with Moody’s officials on Nov. 14, R. Gopalan, secretary, Department of Economic Affairs, said a day later. The government raised its planned borrowing for the six months through March 31 by 32 percent as revenue collections fall short of target. Finance Minister Pranab Mukherjee said Oct. 4 that it may be hard to meet his goal of cutting the budget deficit to a four-year low of 4.6 percent of GDP.
Moody’s rates India’s rupee sovereign debt a Ba1, the highest junk grade, a level shared by Indonesia and Morocco. India’s foreign-currency debt is rated at Baa3, the lowest investment grade. Sheth, who declined to comment on the lobbying by the finance ministry, expects the budget gap to be as high as 5.5 percent in the year ending March 31. Mukherjee said yesterday the government isn’t revising its deficit target yet.
