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UPDATE 2-China Nov new loans jump more than expected, modest easing seen on track

By Judy Hua and Kevin Yao

* Nov new loans 1.39 trln yuan vs f'cast 1.2 trln yuan

* Nov M2 money supply +8.2% y/y, vs f'cast of +8.4%

* Nov TSF 1.75 trln yuan, vs f'cast 1.5 trln yuan

* Modest c.bank easing seen on track to support slowing economy (Adds analyst comment, context)

By Judy Hua and Kevin Yao

BEIJING, Dec 10 (Reuters) - New bank loans in China rebounded more than expected in November as the central bank lowered some key lending rates and encouraged faster credit growth to prop up the slowing economy amid Sino-U.S. trade tensions.

Chinese regulators have been trying to boost bank lending and lower financing costs for over a year, especially for smaller and private companies which generate a sizeable share of economic growth and jobs.

But some analysts say credit demand has not picked up as quickly as hoped, possibly due to flagging business confidence and the prolonged U.S.-China trade war, which is reinforcing views that more stimulus is needed soon to spur investment.

Chinese banks extended 1.39 trillion yuan ($197.47 billion) in new yuan loans in November, rising sharply from October and beating analysts' expectations, according to data released by the People's Bank of China on Tuesday.

Analysts polled by Reuters had predicted new yuan loans would rebound to 1.2 trillion yuan in November, from 661.3 billion yuan in the previous month and compared with 1.25 trillion yuan a year earlier.

Bank lending in China usually rebounds in November from a seasonal retreat in October when a week-long National Day holiday falls.

"November credit data improved, with new loans rising more than expected and total social financing growth stabilising," said Luo Yunfeng, an analyst at Merchants Securities in Beijing.

Household loans, mostly mortgages, rose to 683.1 billion yuan in November from 421 billion yuan in October, while corporate loans jumped to 679.4 billion yuan from 126.2 billion yuan.

Outstanding yuan loans grew 12.4% from a year earlier, unchanged from the pace in October. Analysts had expected 12.3%.

Some analysts say the annual comparison is a better way to assess trends in China's credit growth, rather than more volatile monthly readings. After surging early in the year, it has been decelerating since.

Broad M2 money supply grew 8.2% from a year earlier, below estimates of 8.4% in the Reuters poll. It rose 8.4% in October.


China's economic growth cooled to 6.0% in the third quarter, a near 30-year low, but policymakers have been more cautious about growth boosting measures than in past downturns. Massive stimulus programmes in 2008/09 and 2015/16 have left a mountain of debt and lingering fears of a housing bubble.

Still, with a U.S. trade deal proving elusive, China lowered several key interest rates last month -- including its new benchmark rate - in a fresh bid to reduce corporate funding costs, though the cuts have been far smaller than those seen in the United States and much of Asia over the last year.

In addition to worries about debt and financial risks, diverging price trends have made policymakers' choices more challenging. Separate data early on Tuesday showed China's consumer inflation jumped to a near eight-year high in November as pork prices doubled, but producer prices remained in deflation for a fifth straight month.

"Inflation is a constraint for monetary policy," Luo said.

However, Capital Economics said in a note that the underwhelming impact of recent monetary easing on credit growth suggests that more aggressive policy actions may be needed to prevent economic growth from slipping further.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, held steady at 10.7%. TSF growth slowed to 10.7% in October from 10.8% in September.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In November, TSF surged to 1.75 trillion yuan from 618.9 billion yuan in October. Analysts polled by Reuters had expected 1.5 trillion yuan.

China has softened a multi-year crackdown on shadow lending to ease pressure on private firms, while faster government bond issuance is giving a boost to TSF.

It also has allowed local governments to issue 2.15 trillion yuan in special bonds this year and tap some of their 2020 quotas to fund infrastructure projects to help spur investment.

To relieve some of the pressure, China should lower its economic growth target to around 6% for 2020 and step up stimulus, government advisers said ahead of a key leadership meeting on the economy later this month.

Analysts widely expect more trimming of key interest rates in coming months, along with other support measures, but some forecast growth could still decelerate to 5.7% next year before activity levels off.

(Editing by Kim Coghill)