China’s May new yuan loans seen rebounding on policy support: Reuters poll

By Thomson Reuters Jun 7, 2024 | 3:51 AM

BEIJING (Reuters) – China’s new yuan loans likely rebounded in May from April, a Reuters poll showed on Friday, as the central bank told lenders to quicken bank lending to support the economy.

Chinese banks are expected to have issued 1.255 trillion yuan ($173.92 billion) in new yuan loans last month, compared to 730 billion yuan in April, according to the median estimate in a survey of 18 economists.

However, the forecast put the value of loans below 1.36 trillion yuan issued in the same month a year earlier.

“Household credit demand could stay sluggish, with property sales still weak in May and potentially delayed purchase decisions before the latest round of easing efforts,” Citi economists said in a note.

China unveiled a slew of measures to revive its property market, including a 300 billion yuan relending facility to fund state firms’ purchases of completed unsold apartments for affordable housing.

The Citi economists said they expect corporate borrowing appetite staying weak. Reuters reported last month that the People’s Bank of China guided some banks to boost lending, which came as banks face growing profitability pressures.

The PBOC is expected to release May credit data between June 10 and 15.

Robust exports in May offered some relief to policymakers, but official manufacturing PMI survey and tepid home sales showed business and household sentiment was still weak.

Outstanding yuan loans were expected to grow 9.5% in May from a year earlier, down from 9.6% in April, the poll showed. Broad M2 money supply growth in May was seen at 7.2%, the same as April.

M2 money supply includes cash in circulation, corporate demand deposits, fixed corporate, household and other deposits.

Thanks to the issuance of the one-trillion yuan special sovereign bonds as well as accelerated government bond issuance as required by the country’s top policymakers, growth of China’s total social financing (TSF) is expected to rebound from April’s 8.3% – the lowest on record.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies, and bond sales.

Analysts polled by Reuters estimated the TSF in May likely jumped to 2.2 trillion yuan from a rare contraction of 72 billion yuan in April.

The PBOC has revised the April TSF from the previously reported drop of 200 billion yuan.

China set a growth target of around 5% for 2024, but weak demand and protracted property downturn put downside risks to the goal, prompting expectations for interest rate cuts and bank reserves cut.

($1 = 7.2448 Chinese yuan renminbi)

(Reporting by Ellen Zhang and Kevin Yao; Editing by Varun H K)