China bank loans up, more stimulus expected

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    Stimulus. China’s broad money supply in August grew 8.2 percent from a year earlier, above estimates of 8.1 percent forecast in the Reuters poll. It rose 8.1 percent in July. (Reuters Photo)
    Stimulus. China’s broad money supply in August grew 8.2 percent from a year earlier, above estimates of 8.1 percent forecast in the Reuters poll. It rose 8.1 percent in July. (Reuters Photo)

    BEIJING- China’s banks extended 1.21 trillion yuan ($170 billion) in new yuan loans in August as policymakers ratcheted up support for the slowing economy, and further policy easing is expected in coming weeks as the Sino-US trade dispute takes a bigger toll on the economy.

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

    But some analysts say credit demand has not picked up as much as expected, possibly because of weak domestic orders and the deepening US-China trade war. That has reinforced views the government must roll out more stimulative measures to spur investment and stabilize economic activity.

    “August lending data is in line with market expectations. It shows increased support for the real economy. In the next step, monetary policy is expected to be preemptive and flexible, there is room for cutting interest rates and reserve requirements,” said Wen Bin, economist at Minsheng Bank in Beijing.

    August new loans were up from July and slightly more than analysts had expected, People’s Bank of China (PBOC) data showed on Wednesday.

    Analysts polled by Reuters had predicted new yuan loans would rise to 1.2 trillion yuan in August, up from 1.06 trillion yuan the previous month and compared with 1.28 trillion yuan a year earlier.

    Household loans, mostly mortgages, rose to 653.8 billion yuan in August from 511.2 billion yuan in July, while corporate loans climbed to 651.3 billion yuan from 297.4 billion yuan.

    Broad M2 money supply in August grew 8.2 percent from a year earlier, above estimates of 8.1 percent forecast in the Reuters poll. It rose 8.1 percent in July.

    Outstanding yuan loans grew 12.4 percent from a year earlier – in line with expectations but slower than July’s 12.6 percent. Some analysts say the annual comparison is a better way to assess trends in China’s credit growth, rather than more volatile monthly readings.

    Last week, China’s central bank announced it would cut the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan ($126.35 billion) in liquidity.

    Analysts expect more policy easing in coming weeks as the world’s second-largest economy faces growing pressure from escalating US tariffs and sluggish domestic demand.

    The central bank is widely expected to cut one or more of its key policy interest rates in mid-September – for the first time in four years – as it seeks to cut corporate funding costs.

    Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose 10.7 percent in August from a year earlier, unchanged from the pace in July. – Reuters