China’s New Yuan Loans in September Seen Rise on Policy Support: Reuters Poll

China’s New Yuan Loans in September Seen Rise 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 stimulate an economy battered by a property crisis and a resurgence of coronavirus cases.

It is estimated that Chinese banks 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.

This will be higher than the 1.66 trillion yuan issued in the same month a year ago.

The world’s second-largest economy has gained some momentum in recent months after narrowly escaping a second-quarter downturn, but the recovery remains shallow as the outbreak of COVID and a slowdown in property clouds the outlook.

China’s central bank said in late September that it would step up efforts to boost economic recovery, citing a large number of risks to the global economy while pledging to implement prudent monetary policy and maintain reasonably abundant liquidity.

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

The central bank also cut the home provident fund loan rate by 15 basis points for first-time homebuyers from Oct. 1, signaling an urgent need for policymakers to support the beleaguered property market.

China has also allowed some local governments to ease minimum mortgage rates for first-time home buyers.

The survey showed that outstanding yuan loans are expected to grow 10.9% in September from a year earlier, the same growth in August. M2 money supply growth in September saw 12.1% down from 12.2% in August.

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As the central bank faces limited room to loosen policy due to concerns about capital flight, authorities are stepping up infrastructure efforts, dusting off old rules of the game by issuing debt to fund large public works projects to revive the economy.

Local governments issued a net 3.52 trillion yuan of special bonds in the first eight months, Ministry of Finance data showed, as authorities accelerated the issuance of private bonds for infrastructure to support the economy.

Any acceleration in the issuance of government bonds could help boost total social finance (TSF), a broad measure of credit and liquidity. The TSF benchmark 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.

(dollar = 7.1136 renminbi)

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