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China’s Nov New Yuan Loans Seen Retreating, Policy Support in Place- Reuters Poll

China’s new yuan loans are expected to dip in October from the previous month because of seasonal factors, a Reuters poll showed, but the expected lending may exceed the year-earlier amount as the central bank sought to spur economic growth.

Chinese banks are estimated to have issued 665 billion yuan ($91.29 billion) in net new yuan loans last month, less than a third of the 2.31 trillion yuan in September, according to the median estimate in the survey of 26 economists.

But the expected tally would be still higher than the 615.2 billion yuan issued in the same month a year earlier.

“October has always been a low season for new credit, and this year should be no exception,” analysts at Citi said in a note.

“Mortgage repricing effective at end-September could ease household early repayment pressures. Corporate borrowing could enjoy some support from improving profitability and bottoming exports, but we don’t expect a buoyant number either.”

Beijing has been ramping up measures to support the economy, including 1 trillion yuan ($137.43 billion) in sovereign bond issuances and allowing local governments to frontload part of their 2024 bond quotas.

But a property crisis, local debt risks and policy divergences with the West are all complicating the recovery process, highlighted by persistent deflationary pressures.

The People’s Bank of China (PBOC), which has delivered modest interest rate cuts and pumped out more cash into the economy in recent months, has pledged to keep policy supports.

In September, the PBOC cut banks’ reserve requirement ratio for the second time this year, and analysts expect another cut in the coming weeks.

China is expected to hit its annual growth target this year, and the country must transform its growth model to pursue high-quality and sustainable expansion, PBOC Governor Pan Gongsheng said on Wednesday.

Outstanding yuan loans were expected to increase in October by 10.9% from a year earlier, the same as in September, the poll showed. Broad M2 money supply growth in October was seen at 10.3%, unchanged from September.

Local governments are allowed to issue 3.8 trillion yuan in special bonds this year to fund infrastructure projects to bolster the economy.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF was 9.0% higher at the end-September than a year earlier, the same as seen at end-August.

In October, TSF is expected to fall to 1.9 trillion yuan from 4.12 trillion yuan in September, the poll showed.

Source: Reuters