China's new yuan loans set to rise in Aug, keep economy on recovery path: Reuters poll

BEIJING (Reuters) - China’s new bank loans are expected to have risen in August from the previous month, as the central bank sought to keep liquidity flush to support embattled smaller companies and backstop an economy recovering from the coronavirus shock.

FILE PHOTO: A woman wearing a mask walks past the headquarters of the People's Bank of China, the central bank, in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. REUTERS/Jason Lee/File Photo

Chinese banks are estimated to have issued 1.22 trillion yuan ($178.48 billion) in net new yuan loans last month, compared with 992.7 billion yuan in July, according to the median estimate in a Reuters survey of 35 economists.

That would be largely in line with the 1.21 trillion yuan tally a year earlier.

Broad M2 money supply growth in August was seen at 10.7%, matching previous month’s pace.

Annual outstanding yuan loans were expected to grow 13.0% for August, again the same as for July.

Chinese authorities have urged banks to offer cheaper loans and cut fees to help struggling businesses hit by the COVID-19 pandemic. Premier Li Keqiang has said that growth in M2 - a broad gauge of money supply - and total social financing will be significantly higher this year.

Early August data suggested the world’s second-biggest economy has largely managed to bounce back from the coronavirus crisis, with exports rising at their quickest pace in over a year even though weakness in imports pointed to soft domestic demand.

China’s policymakers reiterated recently a flexible and targeted approach to monetary policy and said fiscal policy would be more proactive, indicating to many analysts that Beijing has shifted from its emergency stimulus mode to more targeted measures. [nL4N2FR1AL]

Analysts with Capital Economics expected the issuance of corporate bonds to have eased slightly in August. But other forms of non-bank financing are likely to have picked up, including government bonds and equity.

They also noted the pick-up in shadow credit in July suggested that regulators may have relaxed their grip on the shadow banking sector.

In August, the total social financing (TSF), a broad measure of credit and liquidity, was expected to have risen to 2.73 trillion yuan from 1.69 trillion yuan in July.

“Credit growth may edge up further in August and September before softening in Q4,” said economists with UBS, who expected China’s macro policy stance to remain supportive in the rest of 2020, but with low incentive to ease further.

“U.S.-China tension may persist as a key headwind for China’s growth recovery and RMB exchange rate in the coming months.”

($1 = 6.8355 Chinese yuan renminbi)

Reporting by Lusha Zhang and Kevin Yao; Editing by Shri Navaratnam