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China's new yuan loans expected to rise in November from 22-month lows: Reuters poll

BEIJING (Reuters) - China's new bank loans are expected to rebound in November from a 22-month low the previous month as the central bank lowered some key lending rates and encouraged more credit growth to prop up the slowing economy, a Reuters poll showed.

Chinese banks likely issued 1.2 trillion yuan ($170.48 billion)in net new yuan loans last month, up from 661.3 billion yuan in October, which was the lowest since December 2017, according to the median estimate in a Reuters survey of 31 economists.

Though it would mark a strong jump from the previous month, the forecast is roughly in line with the new loan tally in November 2018.

Bank lending in China usually rebounds in November from a seasonal retreat in October when a week-long National Day holiday fell.

Outstanding yuan loans are expected to grow 12.3% from a year earlier, edging down from 12.4% in the previous month, while M2 money supply growth is expected to hold steady at 8.4%.

To boost bank lending, the People's Bank of China (PBOC) has pumped out trillions of yuan in liquidity by repeatedly cutting banks' reserve requirement ratios since early 2018.

But policymakers have been wary of launching aggressive stimulus measures like those deployed in past downturns, amid concerns about rapidly rising debt, property bubbles and potential capital outflows.

In November, the People's Bank of China (PBOC) gingerly lowered two of its key interest rates. Though the cuts were small -- 5 basis points - they were the first for short-term market rates and medium-term loans since the last economic scare in 2015-16.

China has also trimmed its new loan rate (LPR) three times since it became the official lending benchmark in August, and analysts expected further modest cuts in coming quarters as economic growth plumbs near 30-year lows.

Beijing has been leaning more heavily on fiscal stimulus to weather the current downturn, announcing 2 trillion yuan in tax and fee cuts this year and 2.15 trillion yuan in special local government bond issuance to finance infrastructure projects.

Some 4.32 trillion yuan ($613.73 billion) in local government bonds were issued in January-November. Among them, 2.13 trillion yuan were new special-purpose bonds.

That will give a strong boost to total social financing (TSF), China's broadest measure of credit and liquidity. It is expected to surge to 1.5 trillion yuan from 618.9 billion yuan in October.

In a bid to maintain a steadier stream of project financing, China is also allowing local governments to sell 1 trillion yuan of special bonds this year that are being brought forward from their 2020 quota.

However, while liquidity has remained generally ample for most of the year, analysts say loan demand has been sluggish. Many companies are in no mood to borrow as domestic demand falters and the U.S.-China trade war drags on. Moreover, shrinking sales and profits are making it harder for firms to service existing debt.

Washington has given no indication that it plans to scrap new tariffs on $156 billion worth of Chinese imports scheduled for Dec. 15, even as the two sides try to thrash out a partial agreement to de-escalate the trade dispute.

China should lower its economic growth target to around 6% for 2020 and step up stimulus as the trade war has exacerbated a protracted domestic slowdown, government advisers said ahead of a key leadership meeting on the economy later this month.

(Reporting by Beijing Monitoring Desk; Editing by Kim Coghill)

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