New yuan loans
New yuan loans refer to new lending minus repaid loans. The People’s Bank of China (or PBoC) releases this data on a monthly basis, along with other credit measures that we discussed in the previous article. The latest data for new yuan loans was released on July 14.
New loans pick up
New yuan loans for June amounted to 1,270 billion yuan, compared with 900 billion yuan for May. Economists expected the new yuan loans to come in at 1,000 billion yuan. For the first half of 2015, the new yuan loans reached 6.56 trillion yuan, compared with 5.74 trillion yuan for the same period last year.
Impact on economic activity
Lending activity, as evidenced by new yuan loans, has picked up in China. This is likely due to easing measures taken by the Chinese government. Any such sustained pickup would be positive for the manufacturing and construction activity in the country, which has positive spillover effects on the steel industry and ultimately iron ore.
In turn, this would be positive for the seaborne iron ore players that supply the bulk of their production to China. These players include BHP Billiton (BHP) (BLT), Rio Tinto (RIO), Vale SA (VALE), Fortescue Metals Group (FSUGY), and the Asia–Pacific segment of Cliffs Natural Resources (CLF). CLF forms 2.9% of the SPDR S&P Metals and Mining ETF (XME).