March 9, 2020 / 10:13 AM / 22 days ago

China's February new yuan loans seen falling but policy easing on track: Reuters poll

BEIJING (Reuters) - China’s new bank loans are expected to fall in February from a record in January, but the drop was likely due to seasonal factors as policymakers step up support for the economy jolted by a coronavirus outbreak, a Reuters poll showed.

FILE PHOTO: Chinese Yuan banknotes are seen in this illustration taken February 10, 2020. REUTERS/Dado Ruvic/Illustration

Chinese banks are estimated to have issued 1.10 trillion yuan ($158.73 billion) in net new yuan loans last month, down sharply from 3.34 trillion yuan in January, according to the median estimate in a Reuters survey of 30 economists.

But the forecast figure would still be about 24% higher than a year earlier.

A pull-back in February’s lending is widely expected as Chinese banks tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.

The central People’s Bank of China (PBOC) has been stepping up policy easing since the virus outbreak, cutting the benchmark lending rate, and telling banks to make cheap loans and payment relief to firms which have been hardest hit by the coronavirus outbreak.

The PBOC has pumped trillions of yuan in liquidity into the system by delivering eight reductions in bank reserve requirement ratios (RRR) since early 2018.

It is widely expected to cut the RRR again in coming weeks, and to cut the benchmark deposit rate to create more room for lower funding costs.

Central bank vice governor Liu Guoqiang said last month the bank would ensure ample liquidity through targeted RRR cuts for banks at an appropriate time amid the epidemic.

The virus outbreak and strict government measures used to contain its spread likely halved China’s economic growth in the first quarter compared with the previous three months, triggering expectations for more interest rate cuts, according to the latest Reuters poll.

The government has also rolled out fiscal support for businesses, including more funding for the fight against the virus, tax waivers, social insurance fee cuts and subsidies for virus-hit firms.

All levels of government have allocated funds of 110.48 billion yuan ($16 billion) to fight the outbreak by March 4, including 71.43 billion yuan that has been used, Vice Finance Minister Xu Hongcai said last week.

The government has issued 1.22 trillion yuan local government bonds in the first two months of this year, including 949.8 billion yuan in special bonds, the finance ministry has said.

Any acceleration in bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity.

In February, TSF is expected to fall sharply to 1.6 trillion yuan from 5.07 trillion yuan in January.

Broad M2 money supply growth in February was seen at 8.5%, marginally down from 8.4% the previous month.

Annual outstanding yuan loan was expected to grow 12.1% for February, the same as in January.

Reporting by Judy Hua and Kevin Yao; Editing by Robert Birsel

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