China’s new yuan loans set to rise in June on policy support
China’s new bank loans are expected to have risen in June from the previous month, as the authorities continue with efforts to boost credit and ease policy to get the economy humming again after the sharp coronavirus-induced downturn.
Chinese banks are estimated to have issued 1.80 trillion yuan ($256.51 billion) in net new yuan loans last month, compared with 1.48 trillion yuan in May, according to the median estimate in a Reuters survey of 38 economists.
That would be higher than 1.66 trillion yuan in credit a year earlier.
China dropped its annual growth target this year for the first time since 2002 and pledged more government spending as the COVID-19 pandemic ravaged the world’s second-biggest economy.
Premier Li Keqiang has said that growth in M2 – a broad gauge of money supply – and total social financing will be significantly higher this year.
Broad M2 money supply growth in June was seen at 11.1%, unchanged from the pace of expansion in the previous month.
Annual outstanding yuan loan was expected to grow 13.2% for June, also the same as for May.
The People’s Bank of China has already rolled out a raft of easing steps since early February, including bank reserve requirement cuts and targeted lending support for virus-hit firms.
The central bank cut the re-discount and re-lending rates by 25 basis points as of July 1 to reduce funding costs for smaller firms and rural sectors.
Analysts expect more cuts to banks’ reserve requirement ratios and borrowing costs in coming months.
Beijing has been leaning more heavily on fiscal stimulus to weather the downturn, cutting taxes and issuing local government bonds to fund infrastructure projects.
The government has fixed the quota on local-government special bond issuance at 3.75 trillion yuan, up from 2.15 trillion yuan last year, and the finance ministry said on Wednesday that 59.5% of that quota has already been used up in the first half of this year.
China has also started to issue 1 trillion yuan in special treasury bonds to help cope with the pandemic’s impact on the economy. Sources said the government aims to complete the bond sales by the end of July.
Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity.
In June, TSF is expected to fall to 3.00 trillion yuan from 3.19 trillion yuan in May.
China’s economy is gradually emerging from a 6.8% economic decline in the first quarter, its first contraction on record.
Source: Reuters (Reporting by Judy Hua and Kevin Yao Editing by Shri Navaratnam)