China’s credit expansion disappoints as new loans miss forecasts
Attention is now on whether banks will lower the loan prime rate as early as this month
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[BEIJING] China’s credit expansion missed forecasts in June, as weaker government bond issuance and subdued demand for borrowing outweighed the usual pickup in quarter-end lending.
Aggregate financing, a broad measure of credit, increased about 3.4 trillion yuan (US$497 billion), according to Bloomberg calculations based on data released by the People’s Bank of China on Wednesday (Jul 15). That compares with a median forecast of 3.7 trillion yuan by economists in a Bloomberg survey and an expansion of 4.2 trillion yuan recorded a year ago
Financial institutions extended 1.6 trillion yuan of new loans in the month. The median forecast was an increase of 2 trillion yuan
Credit extension usually picks up in June because banks push for more lending to achieve their quarterly targets. But borrowing demand is showing little sign of emerging from a years-long funk caused by weak domestic consumer spending and investment.
The PBOC urged some banks to boost their lending in June following similar interventions in recent months, Reuters reported earlier.
Attention is now turning to whether banks will lower the loan prime rate as early as this month in line with some analyst forecasts. The PBOC recently priced its new overnight reverse repurchase facility below market expectations, a move that some economists interpreted as a de facto easing signal and a possible precursor to lower lending benchmarks.
Still, the central bank has signalled limited appetite for broad-based monetary easing. A growing number of economists expect it to keep the policy interest rate unchanged throughout this year. BLOOMBERG
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