China: new bank loans in February: down but political support still on track By Reuters

BEIJING (Reuters) – New bank lending in China fell sharply in February from the record of the previous month. This decline is probably due to seasonal factors. Policymakers continue to put pressure on lenders to help cash-strapped companies stay afloat.

Analysts say China needs to boost weak credit growth to help slow down the economic slowdown this year, but investors fear further corporate debt and risk for banks as they ease their credit standards. ready.

China's banks earned 885.8 billion yuan of new net lending in yuan in February, according to data released by the People's Bank of China (PBOC) on Sunday.

This represented a sharp drop from the record of 3.23 billion yuan in January, when several other key credit gauges also rose slightly in response to the easing of central bank policy.

But the February figure was still 5.5% higher at 839.3 billion yuan a year earlier.

Analysts polled by Reuters had predicted new loans of 975 billion yuan in February.

Fewer points were generally expected in February as Chinese banks tended to favor lending early in the year to obtain better quality customers and gain market share.

Broad money supply M2 increased 8.0% in February compared with the previous year, missing forecasts, according to data from the central bank. Analysts expected an increase of 8.4% M2, unchanged from January.

Outstanding loans in yuan increased by 13.4% over the previous year, which is in line with expectations and remains unchanged from January's increase.

Easier seen on the cards

The Chinese central bank is generally expected to further relax its policy this year to boost lending and reduce borrowing costs, especially for small businesses and private companies that are critical to growth and development. job creation.

But politicians have repeatedly vowed not to open the floodgates of credit in an already heavily indebted economy – a legacy of massive stimulus during the 2008-09 global financial crisis and subsequent crises.

Corporate bond defaults broke a record last year, while the banks' non-performing loan ratio reached its highest level in 10 years.

Prime Minister Li Keqiang told parliament on Tuesday that Beijing would intensify the targeted reductions in the reserve requirement ratio (RRR) for small and medium-sized banks, with the aim of increasing corporate loans of more than 30 %.

He also said that monetary policy would be "neither too tight nor too flexible". Li also promised to push for market reforms aimed at lowering real interest rates.

The central bank has already reduced the RRR – the amount banks must reserve – five times in the past year, most recently in January. Further reductions are widely expected.

Sources told Reuters that the central bank was not ready to cut benchmark interest rates yet, but that it is likely to lower market-based rates.

Growth in the stock of Total Social Financing (TSF), a general measure of credit and liquidity in the economy, slowed to stand at 10.1% in February, after 10%. 4% in January, against a record low of 9.8% in December.

The growth of TSF is a rough indicator of credit conditions.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank loan system, such as initial public offerings, trust company loans and bond sales.

In February, TSF fell to 703 billion yuan against 4.64 billion yuan in January.

Analysts note that it takes some time before rising lending translates into growth, suggesting that market conditions could deteriorate before they improve. And there is a risk that more companies are simply borrowing to refinance their existing debt, rather than new investments needed to fuel an economic recovery.

Previous credit spreads have also historically led to speculation in real estate and financial markets. The country's banking gendarme has punished two lenders for illegally injecting money into the stock market, the official Securities Times reported Friday.

According to polls by Reuters, China's economic growth is expected to slow to around 6.2 percent this year, its lowest level in 29 years.

Most economists expect a difficult first half before conditions begin to stabilize around the middle of the year, with support measures starting to have a bigger impact.

Growth slowed to 6.6% last year, as domestic demand was held back by higher borrowing rates and tightening credit conditions, and by the rise of exporters by the trade war with United States.