By Kevin Yao and Shi Bu
BEIJING, Oct 14 (Reuters) – New bank lending in China rose more than expected in September, rebounding sharply from a weak August as policymakers stepped up targeted monetary support for the slowing economy.
Chinese banks extended 1.08 trillion yuan ($161.37 billion) in new loans in September, beating expectations and rising sharply from August’s 60 billion yuan, according to Reuters calculations based on data from the People’s Bank of China (PBOC) on Wednesday.
Analysts polled by Reuters had expected September new yuan loans would reach 975 billion yuan, compared with 1.29 trillion yuan a year earlier. Chinese lenders typically accelerate credit issuance toward quarter-end to meet internal targets.
The pickup in lending suggests Beijing’s latest stimulus push may be gaining traction, but weak overall credit growth points to still-sluggish demand from households and businesses.
Investors are now looking to third-quarter GDP data for signs that the economy, weighed down by the property slump and weak consumer confidence, is beginning to stabilise.
“The improvement likely reflects the rollout of new policy financial instruments in September, which supported project investment and corporate funding demand,” said Zhou Hao, chief economist at Guotai Junan International.
“Together with stronger trade data, the latest figures suggest that existing policy measures are having a positive effect on economic activity.”
China’s trade surplus widened more than expected in September as exports surged, keeping the country on track to surpass last year’s record surplus and likely intensifying trade tensions with major partners.
Household loans, including mortgages, were flat in September after a contraction of 202.9 billion yuan in August, according to Reuters calculations. Corporate loans surged to 1.29 trillion yuan last month from 260 billion yuan in August.
The central bank does not provide monthly breakdowns. Reuters calculated the September figures based on the bank’s January-September data, compared with the January-August figure.
Outstanding yuan loans rose 4.8% from a year earlier, a record low, and down from 4.9% in August, against analysts’ expectations of 4.8%.
New loans issued by Chinese banks totalled 11.52 trillion yuan in the first nine months of this year, down from 14.75 trillion yuan in the same period last year.
PBOC OPTS FOR TARGETED EASING
In late September, the government unveiled measures to spur growth, including targeted rate cuts and mortgage subsidies. Fitch Ratings said the policy package should modestly improve credit transmission, but it is unlikely to materially lift broader credit demand or alter the property sector’s weak trajectory.
Policymakers have pledged to step up policy support to help meet an annual target of 4.5% to 5%. GDP growth slowed in the second quarter to a 3-1/2-year low, as weak investment and household consumption overshadowed strength in manufacturing and exports.
China is set to release third-quarter GDP data on October 19.
Still, few analysts expect imminent cuts to policy rates or banks’ reserve requirement ratios, as the PBOC appears to favour targeted easing measures over broad-based monetary stimulus.
“We doubt the weakness in broad credit will prompt further monetary easing, not least because the PBOC views much of it as structural,” Capital Economics said in a note.
“But given the economy’s high debt burden and growing financial strains in the corporate sector, we expect the PBOC to come under pressure to resume monetary easing next year, with 20bp of rate cuts in our forecast.”
Broad M2 money supply in September expanded 7.2% from a year earlier, according to the central bank data, an 18-month low, and below analysts’ forecast of 7.4% in a Reuters poll. M2 expanded 7.5% in August.
The narrower M1 money supply grew 3.2% year-on-year, compared with 4.1% in August.
Outstanding total social financing – a broad measure of credit and liquidity – rose 7.1% in September from a year earlier, down from 7.2% in August. Any acceleration in government bond issuance could boost such financing.
(Reporting by Kevin Yao and Shi Bu. Editing by Jacqueline Wong, Mark Potter, Alexandra Hudson)
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