January 8, 2019 / 8:03 AM / 4 months ago

POLL-China Dec new loans seen lower but hitting record in 2018

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=CNMSM2%3DECI money supply poll data

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=CNNYL%3DECI new loans poll data

* Dec new loans seen at 800 bln yuan vs Nov’s 1.25 trln yuan

* Dec M2 money supply growth seen at 8.1 pct y/y vs 8.0 pct in Nov

* Dec TSF seen at 1.2 trln vs 1.52 trln yuan in Nov

* Loans, money supply data due Jan 10-15

BEIJING, Jan 8 (Reuters) - New bank loans in China likely fell in December after a rebound the previous month, a Reuters poll showed, but lending for all of 2018 still set a fresh record as the central bank works to boost credit to support the slowing economy.

Chinese banks were expected to have issued 800 billion yuan ($116.79 billion) in net new yuan loans in December, much lower than the 1.25 trillion yuan extended in November, according to a Reuters survey of 33 economists.

However, some analysts believe December slowdown may reflect seasonal factors as banks usually lend less towards the year-end due to tight loan quotas and capital charges.

For the year as a whole, China’s loan growth looks more solid, though the trend has also been influenced by a regulatory crackdown on shadow lending that has forced banks to shift riskier loans back onto their books.

If December data in the coming week is in line with forecasts, total new bank lending in China in 2018 could hit 15.89 trillion yuan ($2.32 trillion), up 17.4 percent from the previous record of 13.53 trillion yuan in 2017.

Analysts say faster credit expansion will be key to stabilising China’s economy this year. GDP growth likely cooled to a 28-year low of around 6.5 percent in 2018 and is expected to fade further in coming quarters before a raft of support measures start to kick in.

As in past downturns, Chinese authorities have tried to stoke credit demand by fast tracking more infrastructure projects and injecting ample funds to keep financial conditions supportive and bring down market interest rates.

Last week, the People’s Bank of China cut the amount of cash that banks have to hold as reserves for the fifth time in the past year , freeing up $116 billion for new lending.

But government efforts to channel more funds to struggling small firms are facing a hurdle as banks are wary of risking exposure to more bad loans. Cash-starved companies may be taking advantage of lower borrowing costs to refinance, but many are in no mood to make new investments given the weak business climate.

Several key credit gauges in China are at record lows, and analysts say it will take at least a few quarters for the latest policy easing measures to turn the trend around.

Broad M2 money supply growth in December was seen at 8.1 percent, only marginally up from an all-time low in the previous month.

Annual outstanding yuan loan growth was expected to have inched up to 13.2 percent for December.

China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, is estimated to have dropped to 1.2 trillion yuan last month after climbing to 1.52 trillion yuan in November.

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.

Growth of outstanding TSF also slowed to a new low in November, as regulators’ continued crackdown on shadow banking is slowly shutting off a major source of funding for smaller, private firms.

Analysts say Beijing will have to keep up a steady stream of stimulus to steady the economy. Further cuts in the RRR are widely expected this year along with tax cuts and other measures to reduce strains on corporate balance sheets.

“After this cut, we expect a total of 150bp RRR cuts for the rest of this year, accompanied by more liquidity injections through the medium-term lending facility (MLF) or targeted MLF (TMLF),” analysts at Nomura said in a note.

A few China watchers are also expecting some form of interest rate cuts at some point, but policymakers are believed to be wary of more aggressive easing measures which could add to a mountain of debt and pressure the yuan currency.

The Bank of Communications, one of the country’s biggest lender, predicted this week that banks could make small cuts in home mortgage rates in some cities this year to spur the cooling property sector. ($1 = 6.8498 Chinese yuan renminbi) ($1 = 6.8598 Chinese yuan renminbi) (Reporting by Lusha Zhang and Kevin Yao; Editing by Kim Coghill)

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