By Kevin Yao, Shi Bu and Liz Lee
BEIJING (Reuters) -New bank lending in China rose less than expected in May after hitting a nine-month low in April, as companies and consumers remained cautious about taking on more debt despite interest rate cuts and a trade truce between Beijing and Washington.
Chinese banks extended 620 billion yuan ($86.34 billion) in new loans in May, rising from 280 billion yuan in April – the lowest since July 2024, according to Reuters calculations based on data released by the People’s Bank of China on Friday.
Analysts polled by Reuters had expected May new yuan loans would reach 850 billion yuan, but still lag the 950 billion yuan seen a year earlier.
“Bank loan growth continued to slow last month, but broad credit growth held steady, thanks to the continued strength of non-bank borrowing,” Capital Economics said in a note.
“With deflation keeping real lending rates elevated, despite the recent small fall in policy rates, we don’t expect much of a pick-up in private credit demand over the coming months.”
The central bank does not provide monthly breakdowns. Reuters calculated the May figures based on the bank’s January-May data, compared with the January-April figure.
Banks extended 10.68 trillion yuan in new loans in January-May, down from 11.14 trillion yuan in the same period last year.
Household loans, mostly mortgages, expanded 54 billion yuan in May, compared with a contraction of 521.6 billion yuan in April, according to the bank’s data and Reuters calculations.
But corporate loans fell to 530 billion yuan from 610 billion yuan in April.
The U.S. and China reached a framework trade deal at talks in London this week, after a fragile truce struck in May faltered over China’s mineral export curbs, prompting U.S. retaliatory export controls on semiconductor software, jet engines, and other goods.
But analysts expect eventual U.S. tariffs, while being rolled back to some degree, will remain much higher than past years, pressuring Chinese exporters, while a protracted property crisis continues to sap loan demand and confidence.
Beijing’s raft of monetary easing measures last month aimed at cushioning the impact of the trade war, including rate cuts and a major liquidity injection, did appear to help boost credit demand to some extent, and analysts said the benefits of the measures may not yet be fully realised.
Still, Capital Economics expects the central bank to cut its policy rate by a further 40 basis points (bps) later this year after last month’s 10 bps cut.
Outstanding yuan loans rose 7.1% in May from a year earlier, a fresh record low and down from a 7.2% pace in April. Analysts had expected 7.2% growth.
Broad M2 money supply grew 7.9% from a year earlier, the central bank data showed, below analysts’ forecast of 8.1% in a Reuters poll. M2 expanded 8.0% in April.
The narrower M1 money supply climbed 2.3% year-on-year, compared with 1.5% in April.
Outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose 8.7% year-on-year, unchanged from April.
An acceleration in government bond issuance to boost the economy helped boost growth in TSF.
TSF includes off-balance-sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
(Reporting by Kevin Yao, Shi Bu and Liz Lee; Editing by Kim Coghill)
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