China economy still on track for modest recovery

China’s new loan figures for November show lending coming in a shade slower than market expectations last month with the pace of total financing, that’s a very broad measure of financing in China which includes bond and equity financing as well, also slower versus previous months. But despite the latest figures, many say that the economy is still on track for a modest recovery.

Chinese banks extended just under 523 billion yuan of new yuan loans in November, according to China’s central bank. Slightly below medium forecasts of 550 billion yuan, bringing the total new yuan lending to 7.85 trillion yuan in the first 11 months of the year. This implies that total lending is on course to exceed 8.5 trillion yuan for the full-year 2012, up from 7.47 trillion in 2011.

China’s total social financing aggregate, a broad measure of liquidity in the economy, came in at 1.14 trillion yuan in November, down from just below 1.3 trillion yuan in October.

Analysts say additional monetary policy loosening is NOT necessary going into the new year as there are more signs of the economy recovering from its low point in the 3rd quarter this year.

The central bank data also shows that M2 supply, the broadest measure of money supply grew 13.9 percent in November from a year earlier… missing market expectations of a 14.1 percent rise. Analysts expect yuan lending to continue to be tight next year as demand increases alongside the economic recovery.

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