China’s Aug new yuan loans seen rebounding on policy support – Reuters poll

BEIJING (Reuters) – China’s new yuan loans are expected to rebound in August after tumbling in July to the lowest since late 2009, a Reuters poll showed, as the central bank seeks to shore up economic growth amid soft demand both at home and abroad.

Chinese banks are estimated to have issued 1.20 trillion yuan ($163.41 billion) in net new yuan loans last month, more than triple July’s 345.9 billion yuan, according to the median estimate in the survey of 20 economists.

But that would be lower than 1.25 trillion yuan issued the same month a year earlier.

“The headline numbers could improve, yet we remain cautious on credit demand,” Citi analysts said in a note.

“For households, mortgage prepayment could have some relief with mortgage repricing underway. Corporate credit demand could be lukewarm as indicated by low bills rates.”

To support the economy, the government has rolled out a series of policy measures in recent months, including property easing steps last week to spur housing demand.

Last month, a senior central bank official said the bank would flexibly use policy tools such as reserve requirement ratio (RRR) cuts to ensure reasonably ample liquidity.

Premier Li Qiang said this week that China is expected to achieve its 2023 growth target of around 5%, but some analysts believe the target could be missed due to a worsening property slump, weak consumer spending and tumbling credit growth.

Outstanding yuan loans were expected to grow by 11.1% in August from a year earlier, the same as in July, the poll showed. Broad M2 money supply growth in August was seen at 10.7%, the same as the previous month.

Local governments issued a net 2.497 trillion yuan in special bonds in the first seven months of 2023, the finance ministry data have shown, as authorities accelerated special bond issuance for infrastructure to prop up the economy.

China is aiming to complete the issuance of the 2023 special local government bonds quota of 3.8 trillion yuan by end-September. Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Annual growth of outstanding TSF slowed to 8.9% in July from 9.0% in June.

In August, TSF is expected to jump to 2.46 trillion yuan from 528.2 billion yuan in July.

($1 = 7.3434 Chinese yuan renminbi)

(Reporting by Judy Hua and Kevin Yao; Editing by Tomasz Janowski)