China's rapid loan growth may add pressure on asset prices

Data released by China's central bank on Thursday showed that Chinese banks extended 1.04 trillion yuan ($A201 billion) in net new yuan loans in December, quite contrary to the authorities’ inclinations to de-leverage.

Analysts had expected new lending would fall to 700 billion yuan from November’s 794.6 billion yuan. Corporate loans accounted for the bulk of new yuan loans in December. Details of the report showed household loans accounted for 50 percent of total new yuan loans in 2016, while corporate loans accounted for 48 percent.

Data shows a strong willingness among Chinese corporates to accumulate cash as well as banks’ intentions to expand loan size, amid expectations that the authorities may tighten credit extension in 2017.

The recent activities of Chinese authorities suggests steps to prevent further leverage build-up and asset bubbles. Rapid loan growth raises possibility of upward pressure to asset prices.

"We see the possibility that the Chinese authorities may take actions to urge banks to slow credit expansion. The authorities will likely tighten financial regulations in order to combat off-balance sheet activities." said ANZ in a report to clients.