CHINESE banks extended more new loans in August than expected, while broad credit growth quickened, pointing to continued policy support as the economy recovers from a record coronavirus-induced slump.

Banks extended 1.28 trillion yuan (US$187.25 billion) in new yuan loans, up 29 percent from July and slightly exceeding analysts’ expectations, according to data released by the People’s Bank of China (PBOC) on Friday.

Household loans, mostly mortgages, rose to 841.5 billion yuan from 757.8 billion yuan in July, while corporate loans jumped to 579.7 billion yuan from 264.5 billion yuan.

The PBOC has rolled out a raft of support measures since early February, including cuts in lending rates and banks’ reserve requirements and targeted loan support for virus-hit companies.

But analysts say the central bank has now moved out of emergency mode to a more steady stance amid signs that the economy is quickly getting back on solid footing. Some analysts now believe there will be no more cuts to key interest rates this year.

“We anticipate a further acceleration in lending in the coming months,” economic research consultancy Capital Economics said in a note.

“A further ramp-up in government bond issuance is planned over the remainder of the year. What’s more, stronger investment demand on the back of the ongoing economic recovery should prop up issuance of corporate bonds and equity.”

PBOC Governor Yi Gang has said new loans are likely to hit a record of nearly 20 trillion yuan this year and total social financing could increase by more than 30 trillion yuan.

Authorities have urged banks to offer cheaper loans and cut fees to help struggling businesses hit by the COVID-19 pandemic, though such support is weighing on lenders’ margins. The country’s five largest banks last month reported their biggest profit falls in at least a decade amid mounting bad loans.

August data so far showed exports rose at their quickest pace in over a year, while factory gate prices fell at a slower pace thanks to stronger industrial demand. Consumer demand, which has lagged, also appears to be turning the corner with auto sales up for a fifth straight month.

Broad M2 money supply in August grew 10.4 percent from a year earlier, which was the same pace as July. Outstanding yuan loans grew 13.0 percent from a year earlier, unchanged from July’s pace and in line with expectations.

Most China watchers prefer to focus on the annual growth figures, which are a better guide to underlying trends in credit creation given that net issuance figures are highly seasonal.

Additionally, annual growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, quickened to 13.3 percent in August from 12.9 percent in the preceding month.

(SD-Agencies)