China bank lending hits record $1.73tn in first half after solid June

The country's economy is gradually recovering from a 6.8% economic decline in the first quarter

The People's Bank of China has rolled out a raft of easing steps since early February. Bloomberg

New bank lending in China rose 22.3 per cent in June from May as authorities continued to boost credit and ease policy to get the world's second-largest economy humming again after a sharp coronavirus-induced contraction.

Chinese banks extended 1.81 trillion Chinese yuan (Dh948billion/$258.3bn) in new loans in June, up from 1.48tn yuan in May and slightly exceeding analysts' expectations, according to data released by the People's Bank of China on Friday.

That pushed bank lending in the first half of this year to a record 12.09tn yuan, beating a previous peak of 9.67tn yuan in the first half of 2019, the data showed.

Analysts had predicted new loans would rise to 1.80tn yuan in June.

The monthly tally was 9 per cent higher than 1.66tn yuan a year earlier. While lending in China typically picks up in June, analysts say policymakers want to maintain strong credit growth until the economy gets back on solid footing.

Household loans, mostly mortgages, rose to 978.8bn yuan in June from 704.3bn yuan in May, while corporate loans rose 927.8bn yuan from 845.9bn yuan, according to the calculation based on the central bank data.

China's economy is gradually recovering from a 6.8 per cent economic decline in the first quarter, its first contraction on record, but analysts say it will take months for broader activity to return to pre-crisis levels.

Central bank Governor Yi Gang said last month that policymakers will keep financial system liquidity ample in the second half of the year as the economy improves but will need to consider withdrawing support at some point, raising questions among investors over when it may start dialling back its stimulus efforts.

The PBOC has rolled out a raft of easing steps since early February, including cuts in lending rates and banks' reserve requirements and extending lending support for virus-hit firms, but it has not slashed interest rates to near zero or embarked on huge bond buying sprees as many other major central banks have done.

Reflecting uncertainties over the recovery from the Covid-19 pandemic, China dropped its annual growth target this year for the first time since 2002 and pledged more government spending.

Premier Li Keqiang has said that growth in M2 - a broad gauge of money supply - and total social financing will be significantly higher this year.

Broad M2 money supply in June grew 11.1 per cent from a year earlier, central bank data showed, in line with analysts' forecasts and the same pace as in May.

Outstanding yuan loans grew 13.2 per cent from a year earlier, also steady from May, as analysts had expected.

Growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, quickened to 12.8 per cent in June from a year earlier.