China’s August new credit rises less than expected, more policy action expected By Reuters

By Kevin Yao and Ella Cao

BEIJING (Reuters) – China’s new bank lending rose less than expected in August after hitting a 15-year low in July, as the central bank maintained accommodative policy and pledged to implement more supportive measures for to support a fragile economic recovery.

Chinese banks made 900 billion yuan ($126.86 billion) in new yuan loans in August, up 246 percent from July but below analysts’ expectations, data released by the People’s Bank of China showed on Friday.

Analysts polled by Reuters had forecast new yuan loans to reach 1.02 trillion yuan last month, up from 260 billion yuan the previous month, but lower than 1.36 trillion yuan a year earlier.

“Both overall credit growth and bank lending slowed in August, coming in below expectations,” Capital Economics’ Leah Fahy said in a note.

“While stronger government spending should provide a boost to the economy in the coming months, this does not appear to be helped by any increase in demand for private credit.”

The People’s Bank of China (PBOC) does not provide monthly breakdowns, but Reuters calculated the August figures based on the bank’s January-August data and the previously published January-July figure.

The PBOC said new yuan borrowing totaled 14.43 trillion yuan for the first eight months of the year.

Loans to households, including mortgages, rose 190 billion yuan in August after contracting 210 billion yuan in July, while corporate loans rose to 840 billion yuan from 130 billion yuan in July, according to Reuters calculations based on PBOC data.

A senior central bank official on Friday pledged to maintain supportive policy and create a sound monetary environment for economic recovery.

Analysts expect the PBOC, which has steadily cut interest rates and boosted liquidity throughout the year, to further ease policy to support growth.

MORE policy easing EXPECTED

The central bank has room to cut its reserve requirement ratio (RRR) – the amount of cash banks must hold as a reserve, a central bank official said last week.

Analysts at UBS expect the PBOC to cut its main policy rate by 10 basis points and cut the RRR by 25 bps in the rest of 2024.

President Xi Jinping on Thursday urged authorities to work hard to meet the country’s annual economic and social development targets, state media reported, amid expectations that more steps are needed to shore up a sluggish economic recovery.

Weakened Chinese economic activity prompted global brokerages to cut their 2024 China growth forecasts below the government’s official target of around 5%.

M2 money supply rose 6.3 percent from a year earlier, central bank data showed, above the 6.2 percent forecast in a Reuters poll. M2 rose 6.3% year-on-year in July.

Outstanding yuan loans rose 8.5 percent from a year ago in August, down from 8.7 percent in July. Analysts were expecting an increase of 8.6%.

Annual growth in total outstanding social financing (FST), a broad measure of credit and liquidity in the economy, slowed to 8.1 percent in August from 8.2 percent in July.

TSF includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trusted companies, and bond sales.

In August, TSF rose to 3.03 trillion yuan from 770 billion yuan in July. Analysts polled by Reuters had expected TSF in August at 2.95 trillion yuan.

(1 USD = 7.0945 renminbi)