China’s June new yuan loans seen surging on supportive policy: Reuters poll

BEIJING (Reuters) – China’s new yuan loans likely more than doubled in June from May, a Reuters poll showed on Tuesday, as the central bank kept up policy support for the economy amid a shaky recovery.

Chinese banks are expected to have issued 2.25 trillion yuan ($309.38 billion) in new yuan loans last month, compared to 950 billion yuan in May, according to the median estimate in a survey of 22 economists.

New loans in China typically tend to rebound in June. However, the expected tally would be much lower than the 3.05 trillion yuan issued in the same month a year earlier.

Moreover, analysts expect several other key credit gauges could fall to record lows, highlighting persistently weak credit demand.

“June data will likely see a typical end-of-quarter spike, which could be supported by more mortgage lending. However, in year-on-year terms, credit demand is likely to remain sluggish,” said ING economists in a note.

Central bank Governor Pan Gongsheng has pledged to stick to a supportive monetary policy stance and said the central bank will flexibly use various monetary policy tools including interest rates and reserve requirement ratios to create a good monetary and financial environment for economic development.

But Pan also said a slowdown in China’s credit expansion is natural due to factors such as economic shifts and less lending to the property sector and local government financing vehicles (LGFVs).

A prolonged crisis in the property sector has weighed heavily on demand and consumer confidence.

The People’s Bank of China (PBOC) is expected to release June credit data between July 10 and 15.

While exports have been surprisingly strong, manufacturing activity fell for a second month in June while services activity slipped to a five-month low, an official survey showed, keeping alive calls for further stimulus.

“China’s economic activity is expected to moderate further in June, with a continued slowdown in credit growth,” said Serena Zhou, senior China economist at Mizuho Securities.

While the PBOC is expected to avoid significant easing measures in the coming months, local governments are likely to accelerate their property support following the roadmap outlined by China’s recent property stimulus package, Zhou added.

Outstanding yuan loans were expected to grow 9.0% in June from a year earlier, down from 9.3% in May, a record low, the poll showed.

Broad M2 money supply growth in June was seen at 6.8% compared with 7.0% in May, also the weakest on record.

Annual growth of total social financing (TSF), a broad measure of credit and liquidity in the economy, was 8.4% in May.

Analysts polled by Reuters estimated the TSF in June likely jumped to 3.34 trillion yuan from 2.07 trillion yuan, likely helped by higher government bond issuance.

China is due to publish its second-quarter gross domestic product growth and June activity data on July 15, amid signs of an uneven recovery. Analysts at ANZ believe year-on-year GDP growth slipped to 4.9% in April-June, from 5.3% in the first quarter.

Investors and markets are awaiting a key meeting of top leaders, known as the third plenum, to be held from July 15 to 18 to chart the course for long-term structural reforms.

Policy advisers believe China could unveil tax and fiscal reforms to allow debt-laden local governments to get more tax revenues to help ease pressures on local finances.

($1 = 7.2725 Chinese yuan)

(Polling by Devayani Sathyan and Rahul Trivedi; Reporting by Ellen Zhang, Kevin Yao and Winni Zhou; Editing by Kim Coghill)


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