BEIJING — New bank loan issuance in China likely rose in August, a Reuters poll showed on Tuesday, partly reversing the previous month’s shock contraction but still capped by tepid credit demand.
Chinese banks are expected to have issued around 800 billion yuan ($112.31 billion) in net new yuan loans last month, according to the average of 19 economist estimates in a Reuters poll.
In July, new yuan loans contracted for the first time in 20 years by 50 billion yuan, falling well short of analysts’ forecasts and reflecting weak private sector demand amid a struggling economy.
While new loans typically fall in July after strong gains in June driven by banks aiming to hit quarterly targets, the contraction was larger than even the most pessimistic analyst forecasts.
“We don’t see much upside for genuine credit demand. For households, the property sector remains weak, and the start of consumer loan interest subsidies from September could also delay some borrowing decisions,” Citi Research said, adding that the government’s efforts to contain price wars could weigh on corporate demand.
China’s major state-owned banks warned of increased pressure on profitability for the rest of the year as the world’s second-largest economy grapples with deflation and global economic volatility.
Fitch Ratings said it was not yet certain whether Chinese policymakers’ efforts to support lending and refinancing and subsidise interest on new consumer loans would revive loan demand or ease pressure on net interest margins.
Manufacturing activity fell for a fifth straight month in August, suggesting producers are awaiting further clarity on a trade deal with the US while domestic demand remains sluggish.
The world’s two largest economies agreed on August 11 to extend their trade truce by 90 days but have yet to outline a plan beyond the pause.
The government is expected to release loans and money supply data on September 10-15.
Cash in circulation plus certain types of deposit such as corporate time deposits and household savings – known as M2 money supply – likely grew 8.7 percent in August from a year earlier, versus 8.8 percent in July, the poll showed.
Economists estimated outstanding yuan loans grew 6.9 percent in August from a year prior, matching the 6.9 percent in the month prior.
Total social financing (TSF) – a broad measure of credit and liquidity – likely grew to 2.46 trillion yuan in August from the revised 1.13 trillion yuan in July, the poll showed. Any acceleration in government bond issuance could boost such financing.
But Citi Research warned that support from government bond issuance to new TSF could start to taper off.
The measure includes off-balance-sheet forms of financing beyond conventional bank lending, such as initial public offerings, bond sales and loans from trust companies.
