Lending by Chinese banks accelerated in the month of July, as Beijing expands liquidity and pushes for financial institutions to extend more credit.
New renminbi loans hit 1.45 trillion yuan in July according to the figures released by the People’s Bank of China (PBOC) on 13 August, well ahead of prior forecasts of around 1.2 trillion yuan
Growth in China’s M2 money supply also posted a rebound, rising by 0.5 percentage points on the preceding month to reach 8.5%.
The new round of data arrives just as monetary policy settings shift from “rationally stable” to “rationally ample,” and the China Banking and Insurance Regulatory Commission (CBIRC) pushes for an expansion in lending as escalating Sino-US trade tensions cast a pall over the economy.
According to Securities Times the acceleration in renminbi lending growth indicates that the ability and willingness of banks to make loans is strengthening, while optimisation of the credit structure is helping to spur domestic demand.
Analysts point out, however, that total social financing (TSF) remained lacklustre in July, with year-on-year growth in outstanding TSF dropping to a record low of 10.3%.
July marked the the launch of changes to the statistical methods used by the Chinese central bank to calculate TSF, with the inclusion of “asset-backed securities of depository financial institutions” and “loan write-offs” under the category of “other financing.”
TSF calculated in the wake of these adjustments point to a 25% on-month decline in July to 1.04 trillion yuan.
Wen Bin (温彬), chief researcher with China Minsheng Bank, said ailing TSF growth in July is the result of the ongoing declines in off-balance sheet forms of financing such as entrusted loans and trust loans, following Beijing’s crackdown on shadow banking.
Wen expects off-balance sheet financing to stabilise following the launch of new asset management regulations and bank wealth management product rules, however, which will help to maintain steady growth in TSF.
Wen also forecasts the launch of new policies to “smooth out” monetary policy transmission mechanisms, which will enable Chinese financial institutions to further expand their support for the real economy.