China's April new yuan loans seen falling amid continued policy normalisation: Reuters poll

BEIJING: New bank loans in China are expected to have dropped in April after a rebound in March, a Reuters poll showed, as the central bank continues with policy normalisation as economy quickly recovers, while maintains support for smaller firms.

Chinese banks are estimated to have issued 1.6 trillion yuan (US$247.37 billion) in net new yuan loans last month, down from 2.73 trillion yuan in March, according to the median estimate in the survey of 19 economists.

That would be slightly lower than 1.7 trillion yuan issued the same month a year earlier.

Annual outstanding yuan loans were expected to grow 12.5per cent for April, lower than 12.6per cent growth in March, the poll showed. Broad M2 money supply was expected to rise 9.3per cent in April from a year earlier, lower than 9.4per cent year-on-year growth in the previous month.

China's credit growths are being closely watched by investors who are increasingly worried about policy tightening as Beijing looks to exit from emergency measures now that the economy is quickly regaining traction.

The surge in loans early this year has prompted regulators to tell banks to trim their loan books to guard against risks from bubbles in domestic financial markets, Reuters reported in March.

Top leaders last week repeated the pledge that they would not make a sudden turn in macro policy, and will make the economic recovery more balanced.

"We continue to expect gradual policy exit from the previous monetary and fiscal stimulus," said analysts with UBS. "In particular, we expect (broad) credit growth to slow to 11per cent by end-2021 from 12.3per cent y/y in March, driven mainly by tighter macro prudential rules and less liquidity offering."

In April, TSF is expected to dip to 2.25 trillion yuan from 3.34 trillion yuan in March.

"We have already seen a more substantial pullback in other forms of borrowing," analysts with Capital Economics said in a note. "Shadow credit has resumed its contraction in recent quarters. And there has been a sharp decline in government bond issuance, due to lower quotas for 2021, and corporate bond issuance, due to concerns about default risks amid reduced state support.

"This will take the wind out of China's economic rebound."

The data is expected to be released between May 10-15.

(US$1 = 6.4681 Chinese yuan renminbi)

(Reporting by Lusha Zhang and Kevin Yao. Editing by Gerry Doyle)