China’s July new yuan loans expected to nearly halve from June

China’s new yuan loans are expected to fall back in July after record lending in the first six months. But are still likely to be higher than a year earlier, because the central bank seeks to underpin the country’s economic recovery. Chinese banks are estimated to have issued 1.20 trillion yuan in net new yuan loans last month. This is according to the median estimate in the survey of 29 economists. That would be higher than 992.7 billion yuan issued the same month a year earlier.

Chinese banks doled out a record 12.76 trillion yuan in new loans in the first half of 2021. This is even as the People’s Bank of China (PBOC) sought to cool broad credit growth to rein in debt risks. China is poised to quicken spending on infrastructure projects while the central bank supports with modest easing steps. Because the risks from the Delta variant and floods threaten to slow its recovery. A meeting of the Politburo, a top-decision making body of the ruling Communist Party, pledged to maintain an accommodative stance in the face of an uneven domestic recovery and global uncertainty, last month.

Effective July 15, the PBOC cut the reserve requirement ratio (RRR) for banks, releasing around 1 trillion yuan in long-term liquidity. Annual outstanding yuan loans were expected to grow. Broad M2 money supply growth in July was seen at 8.7%. the finance ministry data showed that the net local government special bond issuance reached 1.01 trillion yuan in the first half. This is accounting for 28% of the annual quota. Any acceleration in government bond issuance could help boost total social financing (TSF). TSF growth slowed to 11%. In July, TSF is expected to fall to 1.70 trillion yuan from 3.67 trillion yuan in June.