China’s new yuan loans in July are expected to be nearly halved from June

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BEIJING – New Chinese yuan loans are set to decline in July after record lending in the first six months, a Reuters poll showed, but are still expected to be higher than a year earlier, with the central bank seeking support the country’s economic recovery.

It is estimated that Chinese banks issued 1.20 trillion yuan ($ 185.29 billion) in new net loans in yuan last month, up from 2.12 trillion yuan in June, according to the median estimate of the survey of 29 economists.

It would be more than 992.7 billion yuan issued in the same month a year earlier.

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Chinese banks made a record 12.7 trillion yuan in new loans in the first half of 2021, even as the People’s Bank of China (PBOC) sought to slow credit growth to limit debt risks.

China is set to ramp up spending on infrastructure projects as the central bank backs modest easing measures, as risks from the Delta variant and flooding threaten to slow its recovery, said insiders and analysts.

Last month, a meeting of the Politburo, a supreme decision-making body of the ruling Communist Party, pledged to maintain an accommodating stance in the face of a patchy domestic recovery and global uncertainty.

As of July 15, the PBOC reduced the reserve requirement ratio (RRR) of banks, freeing up about 1,000 billion yuan in long-term liquidity. Analysts expect the RRR to cut again this year.

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Annual yuan loans are expected to rise 12.3 percent for July, as in June, according to the survey. The growth of the broad money supply M2 in July was 8.7%, compared to 8.6% the previous month.

Net issuance of local government special bonds reached 1.0 trillion yuan in the first half of the year, accounting for 28 percent of the annual quota, according to data from the Ministry of Finance.

Any acceleration in government bond issuance could help boost Total Social Finance (TSF), a broad measure of credit and liquidity. TSF growth slowed to 11% in June, from an almost three-year high of 13.7% in October 2020.

In July, TSF is expected to fall to 1.70 trillion yuan, from 3.67 trillion yuan in June. ($ 1 = 6.4755 Chinese yuan) (Reporting by Judy Hua and Kevin Yao; Editing by Jacqueline Wong)

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