Faced with a slowdown in domestic demand and potential fallout from a trade war with the United States, Chinese authorities have boosted policy support and softened their stance on deleveraging.
The rise in June loans also reflected increased formal loans amid a crackdown on shadow loans and other riskier lending practices, analysts said, as policymakers seek to bolster the economy while fending off fresh debt and property risks.
“Further cuts in banks’ reserve requirement ratios (RRR) are likely to help keep liquidly ample.
But we must ensure money flows into the real economy,” said Wen Bin, economist at Minsheng Bank in Beijing.
“The higher-than-expected bank loans in June also reflect structural changes in the financial sector as risk controls force banks to move loans back into books.”
Analysts polled by Reuters had predicted new June yuan loans of 1.6tn yuan, compared with May’s 1.15tn yuan.
China’s banks extended a record 13.53tn yuan in new loans last year.
Broad M2 money supply grew 8% in June from a year earlier, central bank data showed yesterday, missing forecasts for 8.3%, as there was in May.
June’s M2 growth was the lowest since at least January 1996, when Reuters data on the series began.
The People’s Bank of China has said a slowdown in M2 growth could be a “new normal” due to official deleveraging efforts.
Outstanding yuan loans in June grew 12.7% from a year earlier, faster than an expected 12.5% and almost the same as May’s 12.6%.
Household loans, mostly mortgages, rose to 707.3bn yuan from 614.3bn yuan in May, according to the data, and accounted for 38.4% of total June new loans, versus 53.4% in May.
Corporate loans rose to 981.9bn yuan from 525.5bn yuan a month earlier.
The world’s second-largest economy has already felt the pinch from a multi-year campaign to reduce debt risks, especially in the financial system, that has increased corporate borrowing costs.
A recent Reuters poll showed China’s gross domestic product growth was expected to ease marginally to 6.7% in the second quarter from a year earlier, versus 6.8% n the previous three quarters.
Second quarter GDP data will be released on Monday. Last month, the PBoC announced its third reserve requirement ratio cut this year, releasing 700bn yuan in liquidity, to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.
China’s financial regulator has told banks to “significantly cut” lending rates for small firms in the third quarter, comparison with the first quarter, two sources with knowledge of the matter told Reuters on Monday.
China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, rose sharply to 1.18tn yuan ($176.30bn) in June from 760.8bn yuan in May, PBoC data showed.
State media on Friday quoted a central bank official as saying that a first half slowdown in China’s total social financing (TSF) was due to delevearging measures.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. That can provide hints of activity in China’s vast and unregulated shadow banking sector, which authorities have also been targeting in their campaign to reduce systemic risks.
China’s fiscal policy has “ample room” to support the economy, the central bank’s chief researcher said in an opinion column on Friday, maintaining that the policy has not been active enough.