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UPDATE 2-China new loans surge in September following policy support
October 15, 2015 / 8:54 AM / 2 years ago

UPDATE 2-China new loans surge in September following policy support

* Sept new loans at 1.05 trln yuan, vs f'cast 885.5 bln yuan

* Jan-Sept new yuan loans jump about 30 pct yr/yr

* Sept M2 money supply up 13.1 pct, vs f'cast 13.2 pct

* Sept TSF rises to 1.3 trln from 1.08 trln in Aug (Adds details, quotes)

By Xiaoyi Shao and Kevin Yao

BEIJING, Oct 15 (Reuters) - Lending by Chinese banks surged by far more than expected in September, with 1.05 trillion yuan ($165.47 billion) in new yuan loans extended following moves to stop the economy slowing by cutting interest rates and prioritising infrastructure projects.

China's bailout of its ailing stock markets distorted lending figures in recent months, but a jump of about 30 percent in new loans in the January-September period from same nine months a year ago showed how the government was trying to steady a slowing economy.

Economists polled by Reuters had forecast new yuan loans would rise to 885.5 billion yuan in September from 809.6 billion yuan in August.

In a bid to stoke activity, the central bank has cut interest rates five times since November, and lowered the amount of cash that the banks must hold as reserves. The latest cut in interest rates and banks' reserve requirements came on August 25.

Other policy measures have included fast-tracking infrastructure investment to cutting down payments for some first-time home buyers and pushing ahead with financial reforms.

"While this points to better financing conditions in the economy, it must be remembered that monetary statistics have always came out with encouraging numbers after an easing move but remain dispirited thereafter - which is a clear indication that there are ongoing problems on the demand side, rather than the supply side," said Chester Liaw, an economist at Forecast Pte Ltd in Singapore.

New loans totalled 9.9 trillion yuan in the first nine months, including 1.48 trillion yuan in July - the highest monthly reading since 2009 as the government pumped billions into equity markets to avert a full-blown crash.

New loans were 9.78 trillion yuan in the whole of 2014.

"This shows that monetary policy is already loose and room for further easing is limited," said Lin Hu, an economist at Guosen Securities in Beijing.

"Fiscal policy may play a more active role," he said.

A summer stock market crash and a surprise devaluation of the yuan in August sent tremors through global markets, raising concerns both inside and outside of China about Beijing's ability to manage its economy.

Data on Oct. 19 is expected to show China's economic growth slowed to 6.8 percent in the third quarter, the weakest since the global financial crisis, putting pressure on policymakers to roll out more support measures as fears of a dramatic slowdown spook investors.

Weighed down by a cooling property market, widespread factory overcapacity and high local debt levels, China is expected to report its slowest economic growth in a quarter of a century this year.

MORE POLICY EASING EXPECTED

China's economic planner said it approved 218 fixed-asset projects worth 1.81 trillion yuan ($285.3 billion) in the first nine months of the year, as Beijing looks to drive infrastructure investment to support slowing economic growth.

The authorities are expected to loosen monetary policy further in coming months, but questions surround its effectiveness, partly because it has encouraged investors to move more money out of China.

The latest Reuters poll showed that the central bank may cut interest rates by another 25 basis points and lower reserve requirements by 50 basis points by the year-end.

The central bank said broad M2 money supply grew 13.1 percent from a year earlier, the People's Bank of China said in a statement on its website.

China's total social financing (TSF), a broad measure of overall liquidity in the economy, rose to 1.30 trillion yuan in September from 1.08 trillion yuan in August, the central bank said.

Weighed down by a cooling property market, widespread factory overcapacity and high local debt levels, China is expected to report its slowest economic growth in a quarter of a century this year. ($1 = 6.3455 Chinese yuan renminbi) (Editing by Simon Cameron-Moore)

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