China's New Yuan Loans Expected to Surge in September

By Kevin Yao and Ella Cao

BEIJING (Reuters) – China's new yuan loans likely increased in September compared to August, according to a Reuters poll, as the central bank escalates stimulus efforts to bolster the sluggish economy and meet this year's growth target.

Banks are estimated to have issued 1.87 trillion yuan ($264.75 billion) in net new yuan loans in September, an increase from August's 900 billion yuan, but still below last year's total of 2.31 trillion yuan for the same month.

To stimulate the economy, the central bank introduced its most comprehensive monetary stimulus package since the COVID-19 pandemic in late September, including significant support for the property market, such as mortgage rate reductions. Additionally, they have promised more policy easing in the future.

Chinese leaders affirmed their commitment to use "necessary fiscal spending" to achieve a growth target of approximately 5% for this year.

On Tuesday, the head of China's state planning committee expressed confidence in reaching the 2024 growth target, but did not propose more substantial fiscal measures, leading to investor disappointment who anticipated stronger support to stabilize the economy.

Outstanding yuan loans are expected to increase by 8.3% in September compared to last year, slightly down from 8.5% in August, signaling weak household and corporate confidence despite reduced interest rates.

Broad M2 money supply growth in September is expected to be 6.4%, a slight rise from 6.3% in August.

An uptick in government bond issuance aimed at revitalizing the economy may enhance the total social financing (TSF), a comprehensive metric of credit and liquidity. TSF growth fell to 8.1% in August from 8.2% in July.

China's finance ministry is set to announce fiscal stimulus plans to invigorate growth during a news conference on Saturday, indicating potential proactive policies.

Local governments have issued 2.83 trillion yuan in special bonds, significantly contributing to project construction this year, as stated by the state planner.

Furthermore, the central government has already distributed 1 trillion yuan in ultra-long-term special bonds for major projects this year, according to the same authority.

The survey suggests TSF likely increased to 3.73 trillion yuan in September, up from 3.03 trillion yuan in August.

The report is anticipated to be released between October 10-15.

($1 = 7.0633 Chinese yuan renminbi)