New yuan loans in China rose during the month of September, remaining well above what markets had initially anticipated. However, the growth of loans is expected to cool down in the fourth quarter as local governments increased restrictions on the housing market.

Chinese banks extended CNY1.22 trillion (USD181 billion) in net new yuan loans in September, well above analysts' expectations and up from CNY948.7 billion in August, data released by the People’s Bank of China (PBoC) showed Tuesday. According to a Reuters poll, analysts had expected new lending of CNY1 trillion, with outstanding loans seen rising 12.9 percent, and money supply seen up 11.6 percent.

Further, broad M2 money supply (M2) grew 11.5 percent from a year earlier, the central bank said on Wednesday, slightly below forecasts but edging up from 11.4 percent in August. Also, outstanding yuan loans grew by 13 percent by month-end on an annual basis, data showed.

Moreover, household loans remained sizeable at RMB645.6 billion, compared to RMB675.5 billion in August. Mid-and long-term household loans rose from RMB528.6 billion in August to RMB574.1 billion in September, suggesting mortgage drawdown was still strong.

Credit to non-financial institutions jumped sharply from RMB120.9 billion to RMB621.7 billion. This data bodes well for September’s activity data (e.g industrial production) which is scheduled to be released tomorrow.

"Capacity reduction and corporate deleveraging will still weigh on the growth of corporate credit (Jan-Sep: -11.9 percent ytd). The strong m/m increase in September cannot offset the long-term weakness," ANZ commented in its latest research report.