By Liz Lee and Kevin Yao
BEIJING (Reuters) – China’s new yuan loans are expected to have sharply decreased in February from an all-time high in January, a Reuters poll showed on Friday, due to muted credit demand after the boost from front-loading loans at the start of the year.
Chinese banks are estimated to have issued 1.275 trillion yuan ($176.03 billion) in net new yuan loans last month, down from 5.13 trillion yuan in January, according to the median estimate of 18 economists.
January’s record high was due to Chinese lenders’ usual front-loading of loans at the beginning of the year to secure higher-quality customers and market share.
The expected new loans in February could be smaller compared with a year earlier as subdued credit demand among companies prevailed.
“Underlying credit demand – especially for corporates, could be yet to recover with bill rates dropping again last month,” analysts at Citi said in a note. “Household loans could enjoy some support from the property sector, and property prepayment should have largely eased by now.”
China’s economy continues to face challenges, including a prolonged property crisis, deflationary pressures, cautious spending by households and businesses, and local government debt issues.
Economic growth in the world’s second largest economy has been unbalanced as exports and manufacturing outpace domestic consumption.
Last month, China’s manufacturing activity expanded at the fastest pace in three months as new orders and higher purchase volumes led to a solid rise in production.
At the annual parliament session that began on Wednesday, China’s Premier Li Qiang signalled further fiscal stimulus and pledged increased efforts to support consumption, reiterating the country’s determination to maintain a growth target of around 5% this year.
Central bank Governor Pan Gongsheng reaffirmed on Thursday a pledge to cut interest rates and inject liquidity int o the financial system through cuts to the amount banks are required to hold as reserves “at an appropriate time.”
But policymakers will have to also juggle efforts to soften the blow of an escalating trade war with the United States.
An additional 10% of U.S. tariffs on Chinese imports took effect this week, adding on to U.S. President Donald Trump’s February 4 tariffs.
China retaliated swiftly with hikes to import levies covering $21 billion worth of American agricultural and food products, moving the world’s top two economies a step closer towards an all-out trade war.
Broad M2 money supply growth last month was seen at 7.0%, the same as in January.
Outstanding yuan loans likely rose 7.4% in February from a year earlier, the poll showed, down from the 7.5% pace in January.
Citi estimated that government bond issuance hit 1.5 trillion yuan in February, providing support for total social financing (TSF), a broad measure of credit and liquidity.
Outstanding TSF grew 8% in January, unchanged from December.
TSF in February likely stood at 2.5 trillion yuan, down from 7.06 trillion yuan in January, the poll showed.
($1 = 7.2430 Chinese yuan)
(Reporting by Liz Lee and Kevin Yao; Polling by Susobhan Sarkar and Pranoy Krishna in Bengaluru and Jing Wang in Shanghai; Editing by Jacqueline Wong)
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