China's yuan loans seen falling in February

A poll shows that China's new yuan loans are expected to fall in February from a record high in January due to seasonal factors, as the central bank keeps policy accommodative to support the slowing economy.

The median estimate of 25 economists shows that Chinese banks issued 1.50 trillion yuan $215 billion in net new yuan loans last month, down from 4.90 trillion yuan in January.

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

China has a modest target for economic growth this year of around 5 per cent, after only 3 per cent 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.

Officials of the central bank said last week that they would adjust monetary policy in a timely and appropriate manner, and that shorting 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 in line with nominal economic growth this year.

The poll showed that outstanding yuan loans were likely to be 11.4 per cent higher than a year ago. The end-January stock of outstanding loans was up 11.3 per cent on a year ago.

The M 2 money supply was 12.5 per cent higher than at the end of February, compared with the growth of 12.6 per cent at the end of January.

China 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 of government bond issuance could boost total social financing TSF, a broad measure of credit and liquidity. At end-January, the Outstanding TSF was 9.4 per cent higher than a year earlier, growing slower than the 9.6 per cent annual rate seen at the end of December.

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