Policy easing triggers surge in China's new RMB loans

RMB loans rising by 16% to RMB919.8 in June reinforces hopes of economic rebound in H2.

According to Nomura, China's new RMB loans rose to RMB919.8bn in June from RMB793bn in May, stronger than expected. The share of medium- to long-term loans was 31%, down from 34% in May, but better than both March and April when it was under 30%. M2 growth rose to a better-than-expected 13.6% y-o-y in June from 13.2% in May.

Here's more from Nomura:

These data send another positive signal that policy easing is indeed working through the system, reinforcing our view that GDP growth bottomed in Q2 and will rebound in H2. We expect new loans to remain high in the coming months, as speeches made by Premier Wen over the past few days indicated that the pace of policy easing will further accelerate and the government will likely push investment growth.

Separately, the total social financing (TSF) statistic for Q2 reached RMB3.9trn, 8.8% higher on year-on-year basis but flat from Q1. This signal is consistent with policy easing, as TSF usually drops on a quarter-on-quarter basis in Q2. Looking at the components, new loans were RMB2.5trn, flat from Q1. Corporate bond financing rose to RMB428bn from RMB396bn in Q1. Other items collectively rose to RMB919.2bn from RMB899.9bn.