China June new bank loans jump as Beijing steps up policy support

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BEIJING — New bank lending in China leapt in June, rising more than expected, while broad credit growth quickened, as the central bank stepped up efforts to revive the pandemic-hit economy.

Chinese banks extended 2.81 trillion yuan ($419.3 billion) in new yuan loans in June, up from May and beating analysts’ expectations, data from the People’s Bank of China showed on Monday showed. The new loans were the highest since March.

Analysts polled by Reuters had predicted new yuan loans would surge to 2.40 yuan in June. The new loans were higher than 2.12 trillion yuan a year earlier.

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Chinese banks doled out 13.68 trillion yuan in new loans in the first six months of 2022, the highest on record for first-half periods, central bank data showed.

The world’s second-largest economy has started to recover from the supply shocks caused by extensive lockdowns since the second quarter, although headwinds to growth persist.

Central bank governor Yi Gang has pledged to keep monetary policy accommodative to support the economy, in line with a package of policy steps unveiled by the cabinet.

But some analysts say the central bank has limited room for maneuver due to worries about capital outflows as the U.S. Federal Reserve hikes rates in a bid to slow inflation.

Broad M2 money supply grew 11.4% from a year earlier – the highest since November 2016 and above estimates of 11.0% forecast in the Reuters poll. M2 grew 11.1% in May from a year earlier.

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Outstanding yuan loans were up 11.2% from a year earlier at the end of June compared with 11.0% growth the previous month. Analysts had expected 11.0% growth.

Authorities have given policy banks 800 billion yuan in new credit quotas and allowed them to issue 300 billion yuan in bonds to fund infrastructure projects.

The cabinet has told local governments to ensure 3.45 trillion yuan in special bond issuance for infrastructure is completed by end-June, part of the 2022 special bond quota of 3.65 trillion yuan.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF rose 10.8% at the end of June from a year earlier, quickening from 10.5% in May and hitting the highest since June 2021.

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.

In June, TSF rose to 5.17 trillion yuan from 2.79 trillion yuan in May. Analysts had expected 4.2 trillion yuan. (Additional reporting by Ella Cao; Editing by Jacqueline Wong)

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