China extends 1.04 trillion net new yuan loans in Dec, despite mounting debt worries

Chinese banks extended 1.04 trillion yuan ($A201 billion) in net new yuan loans in December, more than analysts' expectations and higher than the previous month's 794.6 billion yuan. Analysts polled by Reuters had expected new lending would fall to 700 billion yuan from November’s 794.6 billion yuan.

Capital Economics said the December pick-up was unusual given that annual loan quotas are mostly used up by year-end.

For the year 2016, China's banks extended a record 12.56 trillion yuan ($1.82 trillion) of loans in 2016 as the government encouraged more credit-fueled stimulus to meet its economic growth target.

The rise in new loans comes despite mounting debt worries. Global financial experts warned the nation's debt load is nearing crisis levels. Authorities pledged last month to stem the growth of asset bubbles in 2017 and place greater importance on preventing financial risk.

The central bank said the broad M2 money supply (M2) grew 11.3 percent from a year earlier, missing forecasts. Outstanding yuan loans grew 13.5 percent by month-end on an annual basis. Analysts polled by Reuters had expected outstanding loans to rise by 13.1 percent, and predicted the money supply would rise by 11.5 percent.

Despite China's ever-more frantic pace of credit creation, some analysts say credit is becoming less productive and less efficient. "Credit growth in China right now is about 13 percent but GDP growth is around 6.7-7 percent," said Commerzbank senior emerging market economist Zhou Hao in Singapore.