China’s July new loans rise to 1.45tn yuan, above forecasts: CBIRC

BEIJING/SHANGHAI: Chinese banks extended 1.45 trillion yuan ($210.84 billion) in new yuan loans in July, China’s banking and insurance regulator said, higher than analysts’ expectations, as policymakers continued to pump liquidity into a slowing economy.

Faced with sluggish domestic demand and potential pressure from a trade war with the United States, policymakers have recently boosted policy support and softened their stance on deleveraging.

The People’s Bank of China (PBOC) is also due to issue M2 money supply and outstanding loan growth data for July this week. In a Reuters poll, 36 analysts had predicted new July yuan loans of 1.2 trillion yuan, easing from a five-month high of 1.84 trillion yuan in June.

China’s new loans totalled 1.45 trillion yuan in July, an increase of 623.7 billion yuan from a year earlier, according to preliminary figures in a statement posted on the official website of the China Banking and Insurance Regulatory Commission (CBIRC) on Saturday.

The PBOC has been pumping out more cash to encourage bank lending but it faces difficulty in channeling credit to small firms, which are vital for economic growth and job creation, analysts said. State banks remain reluctant to lend to small firms, which are considered riskier than state-controlled ones.

The PBOC has cut banks’ reserve requirements three times this year, with the latest reduction on July 5 freeing up 700 billion yuan in liquidity. It also lent a net 905.5 billion yuan to financial institutions via its medium-term lending facility (MLF) in June and July, central bank data showed.

Shadow lending clampdown Annual growth in China’s outstanding total social financing (TFS), which includes off-balance-sheet forms of financing, slowed to 9.8 percent in June, the lowest on record. The PBOC is also due to release TFS data for July this week. There has been little change in offbalance-sheet financing, such as trust loans and entrusted loans, the CBIRC said without providing further data.

Beijing has been clamping down on shadow lending in an effort to reduce risk in the wider financial sector. In the first half of the year, the total disposal of non-performing loans hit 800 billion yuan, around 166.5 billion yuan more than the same period a year earlier, the CBIRC added.

At the end of June, the capital adequacy ratio of commercial banks was 13.52 percent and the core tier 1 capital adequacy ratio of 10.57 percent. —Reuters