Increase in corporate financing leads to decline in demand for bank lending
New yuan lending dropped to its lowest monthly point in a year in October, contracting by 14 percent year-on-year.
The decline has exacerbated worries that the current economic rebound will not receive enough financial support to be sustained.
Lenders extended 505.2 billion yuan ($80 billion) worth of new loans last month, falling below the 590 billion yuan the market had expected. The amount was also down from the 623 billion yuan extended in September, according to data released by the People's Bank of China, the country's central bank, on Monday.
"The decline was understandable as deposits decreased at the beginning of the quarter, and as a rise in financing through corporate bonds lessened the demand for bank loans," said E Yongjian, a financial analyst at Bank of Communications Ltd.
The central bank's figures showed yuan-denominated deposits held by lenders decreased by nearly 280 billion yuan in October. E added the decline helps explain why banks were more hesitant to extend loans, noting that those institutions must abide by loan-to-deposit ratio requirements, which are set at 75 percent for most lenders.
Also in October, the total amount of "social financing", which includes loans, bond issues and stocks, came in at 1.29 trillion yuan, down from 1.65 trillion yuan in September.
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