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China’s new yuan loans set to rise in March as lenders help fight pandemic: Reuters poll

BEIJING (Reuters) – China’s new bank loans are expected to have rebounded in March from a sharp drop the previous month, a Reuters poll showed, as policymakers continue to urge lenders to help cash-strapped companies hit hard by the coronavirus crisis.

Chinese banks are estimated to have issued 1.80 trillion yuan ($254.70 billion) in net new yuan loans last month, nearly doubled from 905.7 billion yuan in February and higher than 1.69 trillion yuan a year earlier, according to the median estimate in a Reuters survey of 31 economists.

After a record growth in credit in January, new lending dropped sharply in February, which analysts attributed to seasonal factors.

But if the March reading meets forecasts, total bank lending in the first quarter of this year would reach an all-time high of 6.05 trillion yuan, reflecting a stepped up easing by the central bank to support the world’s second-biggest economy.

On Friday, the central bank cut the amount of cash that small banks must hold as reserves, releasing around 400 billion yuan in liquidity to shore up the economy. The latest RRR cut, effective as of April 15 and May 15, would be the third so far this year and the 10th since early 2018.

Policy sources have told Reuters the PBOC is likely to step up policy easing to support the coronavirus-ravaged economy, including cutting the benchmark lending rate on April 20, following a 20 basis point cut in the 7-day reverse repo rate on March 30.

Beijing has been leaning more heavily on fiscal stimulus to weather the downturn, cutting taxes and issuing local government bonds to fund infrastructure projects.

Local governments issued a total 1.6 trillion yuan in bonds in the first quarter of this year, including 1.1 trillion yuan in special bonds, the finance ministry has said.

China will issue more quotas on local governments’ special bonds to support key projects, and all regions should strive to complete the issuance in the second quarter, according to a cabinet meeting chaired by Premier Li Keqiang at the end of March.

Any acceleration in special bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity.

In March, TSF is expected to rise to 2.8 trillion yuan from 855 billion yuan in February.

Broad M2 money supply growth in March was seen at 8.8%, the same as the previous month.

Annual outstanding yuan loan was expected to grow 12.1% for March, the same as for February.

(Reporting by Judy Hua and Kevin Yao; Editing by Shri Navaratnam)