China’s July bank lending to fall, keeping Beijing focused on policy support: Reuters poll By Reuters

BEIJING (Reuters) – China’s new yuan loans likely fell in July from a month earlier, a Reuters poll showed on Friday, dragged down by tepid credit demand and seasonal factors, even as the central bank steps up policy support for the economy .

Chinese banks are estimated to have issued 450 billion yuan ($62.80 billion) in net new yuan loans last month, down about 79 percent from June’s 2.13 trillion yuan, according to the median estimate survey of 19 economists.

But the expected new loans would be higher than the 345.9 billion yuan issued in the same month a year earlier.

Analysts say that bank lending usually falls in July due to seasonal factors.

Banks issued 13.27 trillion yuan in new loans in the first half of the year, up from a record 15.73 trillion yuan a year earlier.

While seasonal factors are likely to have weighed on net new lending in July, annual loan growth – which reflects underlying trends – may hold somewhat, analysts at Capital Economics said in a note.

“On this basis, bank credit growth likely stabilized in July. The contraction in home sales has eased over the past two months, which, given the lagged effect on mortgage payments, should begin to ease the drag on lending to households,” they. said.

Outstanding yuan loans are expected to have risen 8.8 percent last month from a year earlier, the same as in June, the survey showed.

Headline M2 money supply growth was seen in July at 6.1%, still down from 6.2% in June, according to the average estimate in the survey of 26 economists.

Last month, the People’s Bank of China (PBOC) surprised markets by cutting key interest rates, including the rate on its medium-term lending facility (MLF), in a bid to support growth.

The PBOC pledged to cut funding costs and step up counter-cyclical adjustments at a meeting last week.

A prolonged decline in home ownership and weak expectations for household income growth have soured business investment and consumer confidence. Economic indicators in July showed export growth slowed, but consumer prices rose at a faster-than-expected pace, partly due to weather disruptions to food supplies.

More activity data, including July retail sales, industrial production and investment are expected to be released next week, providing more clues about economic momentum in the second half of 2024.

Any acceleration in government bond issuance could help boost growth in total social financing (TSF), a broad measure of credit and liquidity in the economy, which slowed to 8.1% in June from 8.4% in May .

In July, the TSF is expected to decline to 1.1 trillion yuan from 3.3 trillion yuan in June.

(1 USD = 7.1658 renminbi)

(Polling by Rahul Trivedi and Devayani Sathyan; Reporting by Ellen Zhang and Kevin Yao; Editing by Shri Navaratnam)