September 11, 2019 / 10:14 AM / 3 months ago

UPDATE 1-China bank loans up in August, more stimulus expected

* Aug new loans 1.21 trln yuan vs f’cast 1.2 trln yuan

* Aug M2 money supply +8.2% y/y, vs f’cast of +8.1%

* Aug TSF 1.98 trln yuan, vs f’cast 1.55 trln yuan

* Further policy easing expected amid trade tensions

BEIJING, Sept 11 (Reuters) - China’s banks extended more new yuan loans in August as policymakers ratcheted up support for the slowing economy, and further policy easing is expected in the coming weeks as the Sino-U.S. trade war takes a bigger toll on the economy.

Chinese regulators have been trying to boost bank lending and lower financing costs for more than a year, especially for smaller and private companies which generate a sizeable share of the country’s economic growth and jobs.

But some analysts say credit demand has not picked up as much as expected, possibly due to weak domestic orders and the deepening U.S.-China trade war. That has reinforced views the government must roll out more stimulative measures to spur investment and stabilise economic activity.

“August lending data is line with market expectations. It shows increased support for the real economy. In the next step, monetary policy is expected to be preemptive and flexible, there is room for cutting interest rates and reserve requirements,” said Wen Bin, economist at Minsheng Bank in Beijing.

Chinese banks extended 1.21 trillion yuan ($170 billion) in new loans in August, up from July and exceeding analyst expectations, People’s Bank of China data showed on Wednesday.

Analysts polled by Reuters had predicted new yuan loans would rise to 1.2 trillion yuan in August, up from 1.06 trillion yuan the previous month and compared with 1.28 trillion yuan a year earlier.

Household loans, mostly mortgages, rose to 653.8 billion yuan in August from 511.2 billion yuan in July, while corporate loans climbed to 651.3 billion yuan from 297.4 billion yuan.

Broad M2 money supply in August grew 8.2% from a year earlier, above estimates of 8.1% forecast in the Reuters poll. It rose 8.1% in July.

Outstanding yuan loans grew 12.4% from a year earlier - in line with expectations but slower than July’s 12.6%. Some analysts say the annual comparison is a better way to assess trends in China’s credit growth, rather than more volatile monthly readings.

MORE EASING EXPECTED

Last week, China’s central bank announced it would cut the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan ($126.35 billion) in liquidity.

Analysts expect more policy easing in the coming weeks as the world’s second-largest economy faces growing pressure from escalating U.S. tariffs and sluggish domestic demand.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose 10.7% in August from a year earlier, unchanged from the pace in July.

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.

In August, TSF rose to 1.98 trillion yuan from 1.01 trillion yuan in July. Analysts polled by Reuters had expected August TSF of 1.55 trillion yuan.

China has allowed local governments to issue more debt this year as part of a plan to accelerate infrastructure spending and stoke domestic demand.

But local governments are already close to exhausting their annual bond quotas and special bond issuance dropped back last month as a result, Capital Economics said in a recent note.

Some analysts believe the government could boost funding support for infrastructure in the second half of the year.

Reporting by Beijing Monitoring Desk Editing by Jacqueline Wong

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