China’s new yuan loans seen falling in Feb as c.bank cools credit growth

New bank loans in China are expected to fall in February from a record high in January, a Reuters poll showed, as the central bank seeks to cool credit growth to contain debt risks while maintaining support for ailing small firms.

Chinese banks are estimated to have issued 950 billion yuan ($145.99 billion) in net new yuan loans last month, down sharply from 3.58 trillion yuan in January, according to the median estimate in the survey of 29 economists.

But that would be a 4.9% rise on the 905.7 billion yuan issued a year earlier.

A pull back in February’s lending is widely expected as Chinese banks tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.

China’s central bank has pledged to stabilise the country’s overall debt level that jumped last year due to stimulus measures, but the bank said it will avoid a sudden policy shift and will continue to support ailing small firms.

Last year, the central bank rolled out a raft of measures including cuts in interest rates and reserve ratios to support the coronavirus-hit economy. But it has kept the benchmark lending rate, the loan prime rate, unchanged since May.

Broad M2 money supply was expected to rise 9.4% in February from a year earlier, unchanged from the year-on-year growth in January, the poll showed. Annual outstanding yuan loans were expected to grow by 12.7% for February, the same as in January.

On Friday, Premier Li Keqiang said in his annual work report that China will keep money supply and total social financing growth largely in line with nominal economic growth this year.

Analysts expect annual growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, to slow further from a six-month low of 13% in January.

China set a modest annual economic growth target of above 6%, as the world’s second-biggest economy planned a careful course out of a year disrupted by COVID-19.

The economy is expected to grow more than 8% in 2021, analysts have said, adding that the rebound would be from a low 2.3% base in 2020 and that the recovery remains uneven.

Any acceleration in government bond issuance could help boost total social financing (TSF).

In February, TSF is expected to fall to 950 billion yuan from 5.17 trillion yuan in January.
Source: Reuters (Reporting by Judy Hua and Kevin Yao; Editing by Ana Nicolaci da Costa)