China’s Sept new yuan loans seen rising on policy support: Reuters Poll

BEIJING (Reuters) – China’s new yuan loans are expected to rise in September from August, a Reuters poll showed, as the central bank seeks to spur an economy hobbled by a property crisis and a resurgence of COVID-19 cases.

Chinese banks are estimated to have issued 1.80 trillion yuan ($253.04 billion) in net new yuan loans last month, up from 1.25 trillion yuan in August according to the median estimate in the survey of 24 economists.

That would be higher than the 1.66 trillion yuan issued in the same month a year earlier.

The world’s second-largest economy has gained some steam in recent months after narrowly escaping a contraction in the second quarter, but the recovery remains shallow as COVID flare-ups and a deepening property slump weighs on the outlook.

China’s central bank said in late September that it would step up efforts to consolidate an economic recovery, citing a slew of risks to the global economy while pledging to implement prudent monetary policy and keep liquidity reasonably ample.

In August, the central bank cut the one-year loan prime rate (LPR), its benchmark lending rate, by 5 basis points, and lowered the five-year LPR by a bigger margin.

The central bank also lowered the interest rate for housing provident fund loans by 15 basis points for first-time home buyers from Oct. 1, suggesting an urgency for policymakers to prop up the embattled property market.

China has also allowed some local governments to relax the floor on mortgage rates for first-time home buyers.

Outstanding yuan loans were expected to grow by 10.9% in September from a year earlier, the same as in August, the poll showed. Broad M2 money supply growth in September was seen at 12.1%, down from 12.2% in August.

As the central bank faces limited room to ease policy due to worries over capital flight, authorities are doubling down on an infrastructure push, dusting off an old playbook by issuing debt to fund big public works projects to revive the economy.

Local governments issued a net 3.52 trillion yuan in special bonds in the first eight months, the finance ministry data have shown, as authorities accelerated special bond issuance for infrastructure to prop up the economy.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF rose 10.5% in August, down from 10.7% in July.

In September, TSF is expected to rise to 2.73 trillion yuan from 2.43 trillion yuan in August.

($1 = 7.1136 renminbi)

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