China Aug new loans fall as cooling economy makes both banks, borrowers wary
* China c.bank trying to coax banks to lend as economy cools
* Aug loans 1.28 trln yuan, less than f'cast but up sharply
* Corporate loan demand weaker, consumer lending rises
* Aug M2 money supply up 8.2 pct y/y, vs f'cast of 8.5 pct
* Aug TSF 1.52 trln yuan, vs 1.04 trillion yuan in July
(Adds analyst comment, details)
By Kevin Yao and Fang Cheng
BEIJING, Sept 12 (Reuters) - Chinese banks made fewer new
loans in August than expected, highlighting problems facing the
central bank as it tries to boost credit to smaller companies
facing weaker demand at home and shrinking export orders.
With U.S. trade duties threatening to ratchet up pressure on
China's already slowing economy, its policymakers have shifted
focus in recent months to growth-boosting measures, pushing
banks to lend more and bringing down financing costs.
Chinese banks extended 1.28 trillion yuan ($186.40 billion)
in net new yuan loans in August, according to data released by
the People's Bank of China (PBOC) on Wednesday.
Analysts polled by Reuters had predicted an August tally of
1.3 trillion yuan, down from July's 1.45 trillion yuan but
nearly 20 percent more than the same month last year.
"Financing demand is relatively weak as firms are unwilling
to borrow," said Luo Yunfeng, chief analyst at Merchants
Securities in Beijing.
Corporate lending fell from July, while household loans
picked up sharply, suggesting banks are taking on more exposure
to relatively safer consumer loans as corporate credit quality
deteriorates along with the slowing economy.
Corporate loans fell to 612.7 billion yuan in August from
650.1 billion yuan a month earlier.
Household loans, mostly mortgages, rose to 701.2 billion
yuan in August from 634.4 billion yuan in July. Household loans
also accounted for 54.8 percent of total new loans in August,
versus 43.8 percent in the preceding month.
Adding to signs of fading credit confidence, analysts
pointed to a sharp rise in banks' bill financing amid suspicion
that they are seeking to expand their loan books with such
short-term loans to limit default risks.
Bill financing jumped to 409.9 billion yuan in August,
accounting for nearly a third of new loans and up from 238.8
billion yuan in July.
Broad M2 money supply grew 8.2 percent in August from a year
earlier. Analysts had expected it to rise 8.5 percent, matching
Outstanding yuan loans grew 13.2 percent from a year
earlier, matching expectations and in line with July.
POLICY SHIFTING TOWARD STIMULUS, LOOSENING
To head off a sharper slowdown in the economy and weather
the U.S. trade row, China is ramping up infrastructure spending
and pumping ample liquidity into the financial system to guide
borrowing rates lower.
The central bank also is trying to encourage banks to keep
lending to struggling small and mid-sized private firms, which
traditionally have a tougher time accessing affordable funding
than their larger, state-owned peers.
Regulators reportedly said in August they would encourage
banks to roll over loans to smaller firms without requiring
repayment of principal.
But China's commercial banks are increasingly cautious.
Non-performing loans jumped sharply for smaller banks in the
second quarter and corporate bond defaults are on the rise, even
as Beijing tries to maintain a broader clampdown on riskier
lending and prevent another explosive jump in debt.
At least 13 lenders, including 10 rural commercial banks,
have had their credit ratings cut or outlooks downgraded to
negative since the start of 2017, according to a Reuters
analysis in July.
MORE SUPPORT MEASURES EXPECTED
With the Trump administration expected to trigger more
tariffs against Beijing at any time, and possibly extend them to
cover virtually all of China's exports to the United States,
analysts are pencilling in more fiscal and monetary policy
support measures in coming months.
The PBOC has already cut banks' reserve requirement ratios
(RRR) three times so far this year, with at least one more RRR
cut expected in 2018.
TO be sure, total new bank loans in the first eight months
of the year jumped nearly 19 percent from a year earlier to
11.76 trillion yuan. That is well on track to set a new
full-year record, eclipsing last year's 13.53 trillion yuan.
But increased bank lending has barely compensated for
shrinking off-balance sheet shadow loans, which have been one of
the major targets of regulators as they seek to reduce systemic
Shadow lending has been an important source of funds for
cash-starved private firms.
Combined trust loans, entrusted loans and undiscounted
bankers' acceptances, which are common forms of shadow banking
finance, fell by 267.4 billion yuan in August, following a slide
of 1.75 trillion yuan in the first seven months.
Annual growth in outstanding total social financing (TSF), a
broad measure of credit which includes off-balance sheet forms
of financing, slowed to 10.1 percent in August, the lowest on
record, from July's 10.3 percent.
TSF did rise to 1.52 trillion yuan in August from 1.04
trillion yuan in July. Capital Economics believes that a sharp
jump in local government bond issuance supported the monthly
reading, but said the pace is not sustainable given they are
close to hitting their annual quotas.
"Policymakers will soon need to turn to other measures, such
as further monetary easing or a relaxation of constraints on
off-budget local government borrowing, in order to put a floor
beneath credit growth and help prop up economic activity,"
senior China economist Julian Evans-Pritchard said in a note.
(Reporting by Kevin Yao and Cheng Fang; Editing by Kim Coghill)
First Published: 2018-09-12 11:08:55
Updated 2018-09-12 13:07:54
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