China’s banks remain reluctant to lend amid US trade war uncertainty, new data shows

The value of new yuan loans rose to 1.18 trillion yuan (US$170.54 billion), from April but below market expectations of 1.3 trillion yuan

Impact of US-China trade war is spooking lenders, although overall social credit picked up

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New bank lending in China fell below expectations in May, fuelling concerns over the effect of the trade war with the United States. Photo: Bloomberg

Published: 7:21pm, 12 Jun 2019Updated: 7:22pm, 12 Jun 2019

Chinese banks lending was slightly higher in May from a month earlier, but the value remained below expectations as the impact of the trade war played on lenders’ minds, leading to speculation that the economy may need another, bigger jolt in the arm.

The value of new yuan-denominated loans dropped to 1.18 trillion yuan (US$170.54 billion) in May, lower than the market expectation of 1.3 trillion yuan and only slightly higher than April’s reading of 1.02 trillion yuan, according to data released by the People’s Bank of China (PBOC) on Wednesday.

Loans to companies remained almost flat, showing banks are feeling uncertain after the trade talks between Beijing and Washington stalled in early-May, according to a research note by economists at Barclays.

The market is now debating whether further easing of monetary policy easing is required, and must consider the potential of a US Federal Reserve rate cut too. The numbers also suggest that the PBOC’s efforts to prop up the economy with stimulus have thus far been inadequate. The central bank has engaged in a number of initiatives designed to loosen credit and get banks lending to individuals and small businesses.

The value of new yuan-denominated loans dropped to 1.18 trillion yuan (US$170.54 billion) in May, lower than the market expectation of 1.3 trillion yuan and only slightly higher than April’s reading of 1.02 trillion yuan, according to data released by the People’s Bank of China on Wednesday. Photo: Xinhua

“The rise over April was lower than expected, reflecting continued pressure on the economy,” said Chen Ji, a senior analyst with the Bank of Communications in Shanghai.

National aggregate financing, a broad measure of credit to the real economy, rose to 1.4 trillion yuan from 1.36 trillion in April, an increase of 446.6 billion from a year earlier. As well as new loans, national aggregate financing also includes entrusted loans, banker's acceptance bills and other types of financing.