China June new bank loans jump as Beijing steps up policy support

NEW bank lending in China leapt in June, rising more than expected, while broad credit growth quickened, as the central bank stepped up efforts to revive the pandemic-hit economy.

Chinese banks extended 2.81 trillion yuan (S$590 billion) in new yuan loans in June, up from May and beating analysts’ expectations, data from the People’s Bank of China showed on Monday (Jul 11). The new loan volume was the highest since March.

Analysts polled by Reuters had predicted new yuan loans at 2.40 trillion yuan in June, up from 1.89 trillion yuan in May and compared with 2.12 trillion yuan a year earlier.

Household loans, including mortgages, rose to 848.2 billion yuan in June from 288.8 billion yuan in May, while corporate loans jumped to 2.21 trillion yuan from 1.53 trillion yuan in May, central bank data showed.

“Corporate financing demand has improved as policies on infrastructure investment boost medium- and long-term corporate loans,” said Zhou Guannan, analyst at Huachuang Securities.

Rising household loans reflected recent property market loosening, she said.

Chinese banks doled out 13.68 trillion yuan in new loans in the first 6 months of 2022, the highest first-half number on record, central bank data showed.

The world’s second-largest economy has started to recover from the supply shocks caused by extensive lockdowns since the second quarter, although headwinds to growth persist.

Central bank governor Yi Gang has pledged to keep monetary policy accommodative to support the economy, in line with a package of policy steps unveiled by the cabinet.

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But some analysts say the central bank has limited room for manoeuvre, especially on cutting interest rates, because of concerns the US Federal Reserve’s rate tightening could be wooing capital away from China.

“The central bank will still keep liquidity reasonably sufficient. There is not much the central bank can do, and all the tools that can be used are basically used.” said Luo Yunong, analyst at Industrial Securities.

“If necessary, there is room for aggregate policy steps.”

Broad M2 money supply grew 11.4 per cent from a year earlier — its highest pace since November 2016 — against the 11.0 per cent forecast in the Reuters poll and the 11.1 per cent year ago-figure.

Outstanding yuan loans were up 11.2 per cent from a year earlier at the end of June, Analysts had expected growth unchanged from 11.0 per cent in May.

Authorities have given policy banks 800 billion yuan in new credit quotas and allowed them to issue 300 billion yuan in bonds to fund infrastructure projects.

The cabinet has told local governments to ensure 3.45 trillion yuan in special bond issuance for infrastructure is completed by end-June, part of the 2022 special bond quota of 3.65 trillion yuan.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. The outstanding total at the end of June was up 10.8 per cent from a year earlier, its growth accelerating from 10.5 per cent in May and the fastest since June 2021.

TSF includes off-balance forms of financing, such as initial public offerings, loans from trust companies and bond sales.

In June, TSF rose to 5.17 trillion yuan from 2.79 trillion yuan in May. Analysts had expected 4.2 trillion yuan. REUTERS