China’s new yuan loans exceed market expectations, mortgage lending remains key driver

New yuan loans in China surged during the month of November, heavily beating market expectations, with mortgage lending being the key driver.

Long-term household loans totalled CNY569.2 billion, accounting for 72 percent of overall new yuan loans. It is possible that banks have been striving to extend mortgage loans and to increase their market share for 2016. Expectations that the mortgage market may slow next year due to policy tightening could be the reason driving this.

The mortgage market is expected to slow going forward amid regulatory tightening. November's surprise is likely a one-off event. Banks usually slow credit extension as the year end approaches, but they may try to increase their mortgage loans with the purposes of gaining market share amid expectations that the housing market may start slowing down in 2017, ANZ reported.

Meanwhile, the Chinese authorities have shown a firm attitude in addressing the potential financial risks related to the shadow banking sector. Today's surprising data will likely trigger some regulatory concerns. Shadow banking activities are expected to wane, the report added.