China's Economic Stimulus Struggles Amid Weak Credit Uptake

China's new bank lending fell to a three-month low in October, with a total of 500 billion yuan extended. Despite aggressive policy measures, credit demand remained weak due to poor corporate profitability. Economists remain skeptical about the impact of recent fiscal and monetary steps on immediate economic growth.

In a stark illustration of China's economic struggles, new bank lending dropped steeply in October, registering a three-month low. The People's Bank of China revealed that commercial banks extended 500 billion yuan in new loans, defying analysts' expectations. This drop underscores the ineffectiveness of recent stimulus policies aimed at revitalizing the economy.

According to a Reuters poll, new yuan loans were anticipated to decrease to 700 billion yuan. However, the lending fell short of this forecast, with household and corporate loans both witnessing significant declines. Luo Yunfeng, an economist at Huaxin Securities, attributed the tepid credit demand to weak corporate profitability, suggesting further delays in economic recovery.

Despite efforts by Chinese policymakers to address an ongoing property market downturn and mounting government debt, financial measures have yet to yield significant improvement. Analysts predict more steps, including a potential cut in banks' reserve requirements, but remain cautious about the pace of economic recovery.

(With inputs from agencies.)