BEIJING (Reuters) - China’s new bank loans are expected to fall in October from the six-month high they reached in September, but the drop was probably caused by seasonal factors, as the central bank eases policy to prop up the slowing economy, a Reuters poll showed.
Chinese banks are estimated to have issued 800 billion yuan ($114.45 billion) in net new yuan loans last month, down 53% from 1.69 trillion yuan in September, when they reached their highest since March, according to the median estimate in a Reuters survey of 26 economists.
The forecast would still beat the average October readings since the record began in November 2010, a Reuters analysis showed. Chinese bank lending in October usually retreats from a surge in September, partly because of a week-long National Day holiday in the first week of October.
To boost bank lending, the People’s Bank of China (PBOC) has pumped out trillions of yuan in liquidity by repeatedly cutting banks’ reserve-requirement ratios (since early 2018. But it has also been wary of rising debt and high property prices and looks increasingly reluctant to ease more aggressively.
To boost credit and lower funding costs, the central cut the interest rate on its one-year medium-term lending facility loans on Tuesday for the first time since early 2016.
Beijing has been leaning more heavily on fiscal stimulus to weather the current downturn, announcing 2 trillion yuan in tax and fee cuts and 2.15 trillion yuan in special local government bond issuance to finance infrastructure projects.
Analysts say the challenge is more about boosting real investment demand and reviving business and consumer confidence as the U.S.-China trade war drags on and domestic growth loses steam, hurting corporate profits.
“Given strong growth headwinds, we expect Beijing to ramp up stimulus measures in coming quarters, with the scale of such stimulus largely contingent on the domestic growth slowdown and how US-China trade tensions unfold,” Nomura analysts wrote in a note last week.
They expect Beijing to use low-profile facilities such as the medium-term lending facility and targeted medium-term lending facility to provide enough funding for its stimulus package. They cited lower return on capital and surging inflation as barriers to bolder easing.
More U.S. tariffs against China are set to take effect on Dec. 15, although they are expected to be scrapped as part of an interim agreement. China and the United States have agreed to roll back tariffs on each others’ goods if a “phase one” trade deal is completed, officials from both sides said on Thursday.
But analysts say continued credit support is needed, given the potential back and forth in trade talks. The plan to roll back tariffs has faced fierce internal opposition in the White House and from outside advisers to U.S. President Donald Trump, multiple sources familiar with the matter told Reuters.
Reporting by Yawen Chen and Kevin Yao; editing by Larry King