By Liz Lee and Kevin Yao
BEIJING (Reuters) – New bank loan issuance in China likely more than doubled in September, a Reuters poll showed on Thursday, possibly lifted by seasonal factors even as slowing government financing and weak demand overhung the market.
Chinese banks are expected to have issued around 1.472 trillion yuan ($206.6 billion) in net new yuan loans last month, according to the average of 22 economists’ estimates in a Reuters poll. Analysts, however, continue to flag slowing government bond issuance as a sign of weaker credit growth, a trend Capital Economics expected to have continued in September.
“While net issuance of new bank loans is likely to have increased substantially in month-on-month terms in September, that’s only because of the seasonal pattern. Weak private demand is likely to have continued to drag down year-on-year growth in outstanding bank loans,” the research house said.
The expected loan growth would follow the 590 billion yuan recovery in August from a shock contraction in the month prior. Even though it charted a recovery, the August data missed analysts’ forecasts, which was attributed to a wobbly economy.
A slice of optimism came at the end of September when China announced it will deploy 500 million yuan of policy-based financial tools to accelerate investment projects, part of Beijing’s efforts to support the slowing economy.
Citi Research saw the policy-financing tool helping to generate new credit demand, while bills discount rates stabilising and upticking throughout September portended a rise in new loans.
The country’s manufacturing activity shrank for a sixth month in September, with producers likely waiting for further stimulus to boost domestic demand and more clarity on what the trade truce struck with the U.S. in August entailed.
The government is expected to release loans and money supply data over October 10-15.
Cash in circulation plus certain types of deposits such as corporate time accounts and household savings – known as M2 money supply – likely grew 8.5% in September from a year earlier, versus 8.8% in August, the poll showed.
Economists estimated outstanding yuan loans grew 6.7% in September from a year prior, slower than the 6.8% in the month prior.
Total social financing (TSF) – a broad measure of credit and liquidity – likely grew to 3.32 trillion yuan in September from the 2.57 trillion yuan in August, the poll showed. Any acceleration in government bond issuance could boost such financing.
The TSF measure includes off-balance-sheet forms of financing beyond conventional bank lending, such as initial public offerings, bond sales and loans from trust companies.
($1 = 7.1252 yuan)
(Reporting by Liz Lee and Kevin Yao; Polling by Vijayalakshmi Srinivasan and Devayani Sathyan in Bengaluru and Jing Wang in Shanghai; Editing by Sam Holmes and Tom Hogue)
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