BEIJING • China's new yuan loans exceeded expectations last month while growth of broad money supply rebounded to a five-month high, as the central bank sought to step up policy support for the economy amid a growing trade battle with the United States.
China's policymakers have been pumping in more cash to encourage banks to lend to struggling firms, but there are signs that lenders are turning cautious as defaults rise, complicating efforts to channel money to sectors that need it.
"New loans exceeded expectations due to policy support,"said analyst E Yongjian at the Bank of Communications in Shanghai.
"The central bank has stepped up liquidity support for banks and encouraged their lending to targeted areas such as small firms and infrastructure projects."
However, some China watchers fear Beijing's shift in focus to supporting growth may spell a return to its credit-fuelled spending binges of the past, undercutting a multi-year campaign to reduce risks in the financial system and a mountain of debt.
Chinese banks extended 1.45 trillion yuan (S$290 billion) in net new loans last month, data from the People's Bank of China showed yesterday. Analysts polled by Reuters had predicted new yuan loans of 1.2 trillion yuan, down sharply from June's 1.84 trillion yuan.
Chinese banks usually make fewer loans in July after traditionally ramping up lending in June. New loans were 825.5 billion yuan in July last year.
Household loans, mostly mortgages, fell to 634.4 billion yuan last month from 707.3 billion yuan in June, while corporate loans fell to 650.1 billion yuan from 981.9 billion yuan a month earlier, according to the central bank's data.
China's banks extended a record 13.53 trillion yuan in new loans last year, and lent 9.03 trillion yuan in the first half of this year, a jump of 13 per cent from the year-ago period.
With rapidly expanding US tariffs threatening to trigger a sharper slowdown in China's already cooling economy, Beijing has started rolling out growth boosting measures ranging from higher infrastructure spending to liquidity injections and tax cuts.
The consensus view is that the authorities are likely to modestly loosen monetary and fiscal policy in various ways, including further cuts in banks' reserve requirements on top of three this year already.
Broad M2 money supply grew 8.5 per cent last month from a year earlier - the highest in five months and beating forecasts for an expansion of 8.2 per cent, and compared with a record low of 8 per cent in June.
Outstanding yuan loans grew 13.2 per cent from a year earlier, faster than an expected 12.8 per cent rise and compared with an increase of 12.7 per cent in June.
China's total social financing (TSF), a broad measure of credit and liquidity in the economy, dropped to 1.04 trillion yuan last month from 1.18 trillion yuan in June, data from the central bank showed yesterday. TSF includes off-balance-sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
That can provide hints of activity in China's vast and unregulated shadow banking sector, which the authorities have also been targeting in their campaign to reduce systemic risks.
REUTERS
