New Chinese yuan loans expected to increase in August, keep economy on recovery track (Reuters poll)

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BEIJING (Reuters) – China’s new bank lending is expected to have increased in August from the previous month, as the central bank seeks to maintain liquidity to support struggling small businesses and support an economy recovering from the coronavirus shock.

FILE PHOTO: A woman wearing a mask walks past the headquarters of the People’s Bank of China, the central bank, in Beijing, China as the country is hit by an outbreak of the novel coronavirus on February 3, 2020. REUTERS / Jason Lee / File Photo

It is estimated that Chinese banks issued 1.22 trillion yuan ($ 178.48 billion) in new net loans in yuan last month, up from 992.7 billion yuan in July, according to the median estimate of a Reuters survey of 35 economists.

This would be largely in line with the tally of 1.21 trillion yuan a year earlier.

The growth of the broad M2 money supply in August was 10.7%, matching the pace of the previous month.

The annual outstanding loan in yuan is expected to increase by 13.0% in August, again as in July.

Chinese authorities have urged banks to offer cheaper loans and lower fees to help struggling businesses hit by the COVID-19 pandemic. Premier Li Keqiang said that the growth of M2 – a large measure of the money supply – and total social financing will be significantly higher this year.

Data from early August suggested that the world’s second-largest economy had largely managed to rebound from the coronavirus crisis, with exports increasing at their fastest pace in more than a year, even as weak imports indicated weak domestic demand.

Chinese policymakers recently reiterated a flexible and targeted approach to monetary policy and said fiscal policy would be more proactive, telling many analysts that Beijing has shifted from its emergency stimulus mode to more targeted measures. [nL4N2FR1AL]

Capital Economics analysts expected corporate bond issuance to slow slightly in August. But other forms of non-bank financing have likely picked up, notably government bonds and equities.

They also noted that the resumption of shadow lending in July suggested that regulators may have loosened their grip on shadow banking.

In August, total social financing (TSF), a general measure of credit and liquidity, is expected to have increased to 2.73 trillion yuan, from 1.69 trillion yuan in July.

“Credit growth could rise further in August and September before slowing down in the fourth quarter,” said UBS economists, who expected China’s macroeconomic policy stance to remain favorable for the rest of the year. 2020, but with little incentive to ease further.

“The tension between the United States and China could persist as a key headwind for the resumption of China’s growth and the RMB exchange rate in the months to come. “

($ 1 = 6.8355 yuan Chinese renminbi)

Reporting by Lusha Zhang and Kevin Yao; Editing by Shri Navaratnam

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