BEIJING (Reuters) - China’s new bank loans likely rebounded in June, a Reuters poll showed, as the central bank scrambled to boost liquidity and support lending to businesses in the face of worsening global trade prospects.
Chinese banks were estimated to have doled out 1.6 trillion yuan ($241.84 billion) in net new yuan loans in June, compared to 1.15 trillion yuan in May, the largest amount since January, according to a Reuters poll surveying 36 analysts as of Monday. Forecasts ranged from 1.0 trillion yuan to 2.1 trillion yuan.
The slowdown in the world’s second-biggest economy, seen particularly in manufacturing data, has been largely due to authorities’ determination to clamp down on shadow banking but the rapid deterioration in Sino-U.S. trade relations has also emerged as a major threat to growth.
“China’s monetary policy is becoming dovish while other central banks are tightening,” Alicia Garcia Herrero, Chief Economist at Natixis Asia Research, wrote in a recent note.
The People’s Bank of China cut the reserve requirement ratios (RRR) for the third time this year on June 24, stressing the need to foster debt-to-equity swaps to clean up banks and supporting small-and-medium-sized enterprises.
In the PBOC’s previous targeted RRR cut in April, 400 billion yuan of net liquidity was released.
Cracks have been appearing in some of China’s debt-laden regional economies, such as the northern port city of Tianjin, as local governments struggle with a crackdown on credit-fueled investment in recent years.
Some analysts are worried China’s economy will be further hurt by shrinking exports and a sell-off in China’s stock market, while others are confident some loosening in financing restrictions could go some way to supporting sluggish growth.
However, Fitch Ratings expects the regulatory tightening of recent years to have a more powerful impact on credit growth than the additional liquidity generated by the cuts.
The United States and China exchanged the first salvos in what could become a protracted trade war on Friday, slapping tariffs on $34 billion worth of each other’s goods and showing no sign of willingness to start talks aimed at a reaching a truce.
A separate Reuters poll of 37 economists showed the median forecast for broad M2 money supply in June - at 8.3 percent - was unchanged from the growth seen in May.
The urge to restore growth through looser monetary policy is seen by some analysts as another risk the Chinese economy could face this year.
“Slowing GDP growth is not a risk; the temptation to pump prime the economy is,” wrote analysts at ANZ Research on Monday.
“Market sentiment will be poor in H2. But targeting growth over reform will be worse, in our view.”
China’s central bank is due to release June money and lending data between the July 10 and 15.
Editing by Sam Holmes