China's August new lending rises less than expected, more policy steps expected

By Kevin Yao and Ella Cao

BEIJING (Reuters) - New bank lending in China jumped less than expected in August after hitting a 15-year low in July, as the central bank keeps policy accommodative and pledges to roll out more supportive measures to bolster a fragile economic recovery.

Chinese banks extended 900 billion yuan ($126.86 billion) in new yuan loans in August, up 246% from July but short of analyst expectations, data released by the People's Bank of China showed on Friday.

Analysts polled by Reuters had predicted new yuan loans would reach 1.02 trillion yuan last month, versus 260 billion yuan the previous month, but lower than the 1.36 trillion yuan a year earlier.

"Both broad credit and bank loan growth slowed in August, coming in below expectations," Leah Fahy at Capital Economics said in a note.

"While stronger government spending should give the economy a boost over the coming months, that doesn't seem likely to be helped by any pickup in private credit demand."

The People's Bank of China (PBOC) does not provide monthly breakdowns, but Reuters calculated the August figures based on the bank's Jan-August data and the Jan-July figure released earlier.

The PBOC said new yuan loans totalled 14.43 trillion yuan for the first eight months of the year.

Household loans, including mortgages, expanded 190 billion yuan in August after contracting 210 billion yuan in July, while corporate loans rose to 840 billion yuan from 130 billion yuan in July, according to Reuters calculations based on the PBOC data.

A senior central bank official on Friday pledged to maintain a supportive policy and create a sound monetary environment for economic recovery.

Analysts expect the PBOC, which has steadily lowered interest rates and increased liquidity throughout the year, to ease policy further to support growth.

MORE POLICY EASING EXPECTED

The central bank has room to lower its reserve requirement ratio (RRR) - the amount of cash banks must hold as reserve, a central bank official said last week.

Analysts at UBS expect the PBOC to cut its main policy rate by 10 basis points and cut the RRR by 25 bps over the rest of 2024.

President Xi Jinping on Thursday urged authorities to strive to achieve the country's annual economic and social development goals, state media reported, amid expectations that more steps are needed to bolster a flagging economic recovery.

Faltering Chinese economic activity has prompted global brokerages to scale back their 2024 China growth forecasts to below the government's official target of about 5%.

Broad M2 money supply grew 6.3% from a year earlier, central bank data showed, above estimates of 6.2% forecast in the Reuters poll. M2 grew by 6.3% year on year in July.

Outstanding yuan loans were up 8.5% year on year in August, down from 8.7% in July. Analysts had expected 8.6% growth.     

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 8.1% in August from 8.2% in July. 

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.

In August, TSF jumped to 3.03 trillion yuan from 770 billion yuan in July. Analysts polled by Reuters had expected August TSF of 2.95 trillion yuan.  

($1 = 7.0945 Chinese yuan renminbi)

(Reporting by Ella Cao and Kevin Yao; Editing by David Goodman, William Maclean)