Bank lending in China likely to have risen in June

Bank lending in China is likely to have risen in June to CNY 1,300 billion from May’s CNY 985.5 billion. The strength is expected to be partial because of a transfer of off-balance-sheet credit to on-balance sheet lending by banks as a response to the recent regulatory tightening, noted Societe Generale in a research report.

Moreover, non-bank credit, particularly banker’s acceptance bills, is expected to have shrunk again due to tightened regulation. Therefore, total social financing might have risen lesser than bank loans.

Local governments have swapped around CNY 450 billion of old debt into LGBs. This is CNY 100 billion more than in May. Still, total credit growth is likely to have decelerated further to 15 percent year-on-year in June from 15.7 percent in May.

“M2 growth probably dropped notably, from 11.8 percent yoy in May to 11.2 percent yoy in June, owing mostly to a higher base last year,” added Societe Generale.

But, the M1 growth is expected to have stayed at higher level.