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Jan. 12, 2017, 7:09 a.m. EST

Chinese bank lending up sharply in December

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By MarketWatch

BEIJING--Chinese banks greatly increased their lending in December, official data showed, possibly signaling a takeoff in corporate demand as Beijing continues to try to stabilize economic growth.

A government infrastructure push, improving corporate profits as producer prices rise and rising bond yields all stimulated companies' appetite for bank loans, economists say.

Chinese financial institutions issued 1.04 trillion yuan ($149.9 billion) in new yuan loans in December, up from 794.6 billion yuan in November, the People's Bank of China reported Thursday. The total was well above the average 676 billion yuan forecast of 11 economists polled by The Wall Street Journal.

The jump was a surprise, said Chen Ji, an economist at Bank of Communications, given that banks normally scale back on lending at the end of the year. They are constrained by annual loan quotas issued by the central bank.

"That said, it is consistent with a stabilizing economy," said Mr. Chen.

Recent gains in industrial prices have improved companies' profitability, analysts say, increasing their appetite for credit. China's producer-price index, which emerged from deflationary territory in September, was up 5.5% from a year earlier in December, official data showed Tuesday--the biggest jump in more than five years.

"We shouldn't underestimate how motivated companies are to increase their inventories," said Jianguang Shen, an economist at Mizuho Securities.

Medium- and long-term loans to nonfinancial corporations, a gauge of corporate-sector demand, came to 695.4 billion yuan, more than three times November's 201.8 billion yuan, according Wall Street Journal calculations based on the central-bank data.

Robust demand for lending should continue at least through the first half of the year, Mr. Shen said, given Beijing's economic-growth resolve.

Medium- and long-term household loans, predominantly mortgage loans, came to about 421.7 billion yuan, accounting for 41% of the new loans issued in December. That is down from around 72% in November.

While most new lending last year went to home buyers, Mr. Chen of Bank of Communications said, this year more will likely go to the real economy.

Also encouraging corporate borrowing from banks are rising bond yields, said Julian Evans-Pritchard, an economist at Capital Economics, as they make it more attractive than raising money from capital markets.

Total social financing, a measure of credit in the economy that includes both bank and nonbank financing, came to 1.63 trillion yuan in December, down from 1.74 trillion yuan in November.

China's broadest measure of money supply, M2, ended December up 11.3% from a year earlier, slowing slightly from November's 11.4% pace and short of the economists' forecast, also 11.4%.

Another measure, M1, which covers liquid assets such as cash and demand deposits, ended December up 21.4% from a year earlier, down from November's 22.7% pace.

Liyan Qi

Write to Liyan Qi at liyan.qi@wsj.com

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