China September Bank Lending Set to Rise on Policy Support: Reuters Poll

China's banking sector is poised for a surge in lending activities in September, as recent policy measures by the government and central bank are expected to boost banks' appetite for lending. A Reuters poll of 20 analysts revealed that new yuan loans issued by Chinese banks are likely to reach 1.8 trillion yuan ($254.7 billion) in September, up from 1.6 trillion yuan in August.

The People's Bank of China (PBOC) has taken several steps to stimulate the economy and support bank lending. In September, the central bank cut the reserve requirement ratio (RRR) for banks by 50 basis points, freeing up around 1 trillion yuan for new lending. Additionally, the PBOC reduced key interest rates, including the seven-day repo rate and the medium-term lending facility rate, to lower borrowing costs for businesses and consumers.

These policy measures, along with the government's capital injection into six major commercial banks, are expected to enhance banks' capital cushions and encourage them to extend more loans. The capital injection, worth up to 1 trillion yuan, will help banks improve their core Tier 1 capital ratios and better handle stress, enabling them to lend more to businesses and consumers.

Furthermore, the property market support package announced by the PBOC in September is likely to play a crucial role in boosting bank lending. The package includes a 50 basis points reduction in average interest rates for existing mortgages and a reduction of the minimum downpayment requirement to 15% on all types of homes. These measures are expected to revive demand in the property sector, encouraging banks to lend more to homebuyers and developers.

The increased fiscal spending and bond issuance by local governments are also expected to contribute to the rise in bank lending. Local governments have been quickening bond issuance to help fund infrastructure projects, which will create demand for bank loans. As a result, banks are likely to increase their lending activities to support these projects and maintain their growth momentum.

In conclusion, China's recent policy measures, including interest rate cuts, RRR reductions, capital injections, and property market support, are expected to drive a significant increase in bank lending in September. The combination of these factors is likely to boost economic growth and support the government's 2024 growth target of around 5%.