China’s Feb new yuan loans seen falling from record high

China’s Feb new yuan loans seen falling from record high

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BEIJING — China’s new yuan loans are expected to fall in February from a record high in January partly due to seasonal factors, a Reuters poll showed, as the central bank keeps policy accommodative to support the slowing economy.

Chinese banks are estimated to have issued 1.50 trillion yuan ($215 billion) in net new yuan loans last month, down sharply from 4.90 trillion yuan in January, according to the median estimate in the survey of 25 economists.

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The expected new loans would still be higher than 1.23 trillion yuan issued the same month of 2022.

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A pull-back in February from January is widely expected, because Chinese banks tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.

Also, the central bank has told some banks to slow the pace of lending to contain risks after the January volume set a record, three bankers told Reuters last month. The banks were told to control the scale of new loans made in February.

China has set a modest target for economic growth this year of around 5% after only 3% last year, one of its worst showings in decades.

The economy, the world’s second largest, has seen a tentative recovery from COVID-19 disruption while facing weaker demand abroad and a domestic property downturn.

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Officials of the central bank said last week that it would adjust monetary policy in a timely and appropriate manner and that cutting banks’ reserve requirements to release long-term liquidity would still be an effective tool to support the economy.

China has pledged to keep money supply and total social financing growth basically in line with nominal economic growth this year.

Outstanding yuan loans at the end of February were likely 11.4% higher than a year earlier, the poll showed. The end-January stock of outstanding loans was up 11.3% on a year before.

Broad M2 money supply at the end of February was seen 12.5% higher than at the same point of 2022, compared with annual growth of 12.6% seen at the end of January.

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China has set the 2023 quota for local government special bond issuance at 3.80 trillion yuan, up from 3.65 trillion yuan last year.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF was 9.4% higher at end-January than a year earlier, growing more slower than the 9.6% annual rate seen at end-December.

In February, TSF is expected to plunge to 2.20 trillion yuan from 5.98 trillion yuan in January.

($1 = 6.9693 Chinese yuan renminbi) (Reporting by Judy Hua and Kevin Yao; Editing by Bradley Perrett)

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