China’s April new yuan loans seen as retreating: Reuters poll

CHINA’S new yuan loans are expected to have dropped in April after hitting an all-time high in the first quarter, a Reuters poll showed, even as the central bank keeps policy accommodative to support the slowing economy.

Chinese banks are estimated to have issued 1.40 trillion yuan (S$268.2 billion) in net new yuan loans last month, about one third of the 3.89 trillion yuan in March, according to the median estimate in the survey of 26 economists.

But the expected new loans would be more than double the 645.4 billion yuan issued in the same month a year earlier, thanks to credit support especially for infrastructure investment and property developers.

The central bank has recently announced two structural policy tools to support property firms facing difficulties and the rental housing scheme, with combined quotas of 180 billion yuan.

“April could be the first month of normalisation after three consecutive strong beats of credit data, although the headline numbers may still look high compared with last April amid lockdown,” analysts at Citi said in a note.

China’s economy grew 4.5 per cent in the first quarter as the end of strict Covid curbs lifted businesses and consumers out of crippling pandemic disruptions, although headwinds from a global slowdown point to a bumpy ride ahead.

The government will maintain support for the economy, focusing on domestic demand which remains inadequate, the Politburo, a top decision-making body of the ruling Communist Party, said late last month.

The central bank has pledged to keep money supply and total social financing growth generally in line with nominal economic growth this year.

Outstanding yuan loans were expected to grow by 12.0 per cent in April from a year earlier, up from 11.8 per cent in March, the poll showed. Broad M2 money supply growth in April was seen at 12.5 per cent, down from 12.7 per cent in March.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF was 10 per cent higher at March-end than a year earlier, growing faster than the 9.9 per cent annual rate seen at the end of February.

China has set the 2023 quota for local government special bond issuance at 3.8 trillion yuan, up from 3.65 trillion yuan last year.

In April, TSF is expected to fall to 2.0 trillion yuan from 5.38 trillion yuan in March. REUTERS