(Repetition of the story from Wednesday evening without modification of the text)
* July new loans 1.08 trln yuan against f’cast 1.20 trln yuan
* M2 July money supply + 8.3% y / y, vs f’cast of + 8.7%
* July TSF 1.06 trln yuan, against f’cast 1.70 trln yuan
* Modest policy easing expected as China’s economy slows
By Kevin Yao and Judy Hua
BEIJING, Aug.11 (Reuters) – China’s new bank lending fell more than expected in July to its lowest level in nine months, while overall credit growth hit its lowest level in 17 months, adding market expectations that modest policy easing may be needed to support the country’s growth. economic recovery.
The world’s second-largest economy has largely rebounded from the massive disruption caused by the pandemic last year, but recent new outbreaks of the delta variants and severe flooding threaten to slow its recovery.
Chinese banks granted 1.08 trillion yuan ($ 166.5 billion) in new yuan loans in July, well down from June’s 2.12 trillion yuan and the lowest level since October 2020 , according to data released Wednesday by the People’s Bank of China (PBOC).
Analysts polled by Reuters had predicted that new yuan loans would fall to 1.20 trillion yuan. Despite the decline, the total was still over 992.7 billion yuan a year earlier.
Loans to households fell to 405.9 billion yuan in July from 868.5 billion yuan in June, possibly due to stricter requirements for real estate financing, while loans to businesses fell to 433.4 billion yuan versus 1.46 trillion yuan, according to Reuters calculations based on central bank data.
Yet Chinese banks distributed a record 12.7 trillion yuan in new loans in the first half of 2021, even as the PBOC sought to slow broader credit growth to limit debt risks amid growing default.
Financial markets are increasingly looking for signs that authorities will announce additional stimulus measures as post-COVID growth rates moderate. In July, the PBOC reduced the reserve requirement ratio (RRR) of banks, freeing up about 1 trillion yuan in long-term liquidity, and analysts expect the RRR to decline further this year.
“After stabilizing in June, overall credit growth resumed its downward path in July and is now at its lowest since February of last year,” Capital Economics said in a note to clients.
“We expect the slowdown and resulting headwinds to the economy to continue in the months to come, notwithstanding further cuts in the RRR and policy rates.”
Many analysts are lowering growth forecasts for the second half of the year as China imposes restrictions to contain an outbreak of the Delta variant, which is dragging down activity, especially in services such as tourism, retail and travel. restaurants.
Further reduction in real estate speculation, rising commodity prices, tightening pollution controls and severe flooding in parts of the country are also weighing on growth.
Insiders and political analysts told Reuters last week that China would support the economy with faster spending on infrastructure projects while the central bank would support activity with modest easing measures. Most analysts believe that key rate cuts this year are still unlikely, although some have recently started to predict them.
The central bank said on Monday it would keep its monetary policy flexible and appropriate to maintain stability as the pandemic persists and the national economic recovery is uneven. The PBOC cited a rebound in COVID-19 cases around the world and the risk of expected policy changes in developed countries that could affect cross-border capital flows.
The Politburo, a supreme decision-making body of the ruling Communist Party, pledged in July to maintain an accommodating stance.
Broad money M2 increased 8.3% year-over-year, central bank data showed, below Reuters poll forecast of 8.7% and pace of 8.6 % observed in June.
Outstanding yuan loans increased 12.3% in July from a year earlier, in line with expectations and unchanged from June.
Growth in total social finance outstanding (TSF), a general measure of credit and liquidity in the economy, slowed to 10.7% in July – the lowest figure since February 2020 – compared to a year earlier and at 11% in June.
Merchants Securities analyst Luo Yunfeng expects TSF growth to bottom out in August as central bank is expected to pump more liquidity, which could help government bond issuance local and stimulate construction.
“One or two RRR cuts the rest of the year are possible, but the chances of reducing the prime lending rate (LPR) should be low,” Luo said.
TSF includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.
In July, the TSF fell to 1.06 trillion yuan from 3.67 trillion yuan in June. Analysts polled by Reuters had expected a July TSF of 1.70 trillion yuan.
“One of the main reasons for the failure (of the forecasts) is still lackluster government funding,” Nomura analysts said. Net funding of government bonds fell to 182 billion yuan in July from 751 billion yuan in June, they noted.
(Reporting by Judy Hua and Kevin Yao; Editing by Kim Coghill)