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UPDATE 2-China March credit data disappoints, raises case for more stimulus

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March new loans 3.09 trillion yuan vs forecast 3.56 trln yuan

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March M2 money supply +8.3% y/y, vs forecast of +8.7%

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March TSF 4.87 trillion yuan, vs forecast 4.70 trillion yuan

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More stimulus seen as c.bank seeks to spur economic growth

(Adds analyst comment, comment from c.bank publication, details)

By Judy Hua and Kevin Yao

BEIJING, April 12 (Reuters) - New bank lending in China rose less than expected in March from the previous month while broad credit growth hit a record low, boosting the case for the central bank to roll out more stimulus steps to help hit an ambitious growth target.

Chinese banks extended 3.09 trillion yuan ($426.95 billion)in new yuan loans in March, according to Reuters calculations based on data released by the People's Bank of China (PBOC), up from 1.45 trillion yuan in February but falling short of analyst expectations.

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Analysts polled by Reuters had predicted new yuan loans would soar to 3.56 trillion yuan in March. The new loans were lower than 3.89 billion yuan a year earlier. The worse than expected credit data followed disappointing trade numbers earlier in the day, which showed both China's exports and imports shrank last month, raising questions about whether the economy is getting back on a stronger footing.

"Bank loan and broad credit growth in China both decelerated sharply in March," Capital Economics said in a note.

"While we expect the PBOC to cut policy rates a little further, weakness in private sector credit demand means that any uptick in broad credit growth will be relatively modest."

The PBOC's data released on Friday showed new loans totalled 9.46 trillion yuan in the first quarter, but the central bank did not give figures for March alone.

Banks made 6.37 trillion yuan in new loans in the first two months, earlier central bank data showed.

"The financing needs of the entire real economy are still not very good, both at the enterprise level and at the bank level, and both sides may be a bit lax,” said Nie Wen, economist at Hwabao Trust.

Wen Bin, chief economist at Minsheng Bank, said slowing credit growth could be partly caused by the central bank's bid to prevent banks from lending too quickly in early 2024 to leave some space for credit expansion in the coming months.

"There is still room for reserve requirement and interest rate cuts, and structural monetary policy tools will provide additional support," he said.

Banks extended 940.6 billion yuan in new household loans, mostly mortgages, in March, versus a 590.7 billion yuan contraction in February, according to Reuters calculations based on central bank data. New corporate loans rose to 2.34 trillion yuan from 1.57 trillion yuan in February.

MORE POLICY EASING EXPECTED China has set an economic growth target for 2024 of around 5%, which many analysts say will be a challenge to achieve without much more stimulus.

Analysts polled by Reuters expected the central bank to cut the banks' reserve requirement ratios (RRR) by 25 basis points (bps) in the third quarter, following a 50-basis point cut earlier this year, which was the biggest in two years.

China's central bank might include the buying and selling of treasury bonds in its policy tool reserve in future, Financial News - a publication backed by the PBOC - quoted experts as saying.

But the publication also cautioned against excessively loose monetary policy.

Broad M2 money supply grew 8.3% from a year earlier, central bank data showed, below estimates of 8.7% forecast in the Reuters poll. M2 grew 8.7% in February from a year earlier.

Outstanding yuan loans grew 9.6% in March from a year earlier - the lowest on record, compared with 10.1% in February. Analysts had expected 9.9% growth.

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 8.7% in March - the lowest on record - from a year earlier and from 9.0% in February.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In March, TSF rose to 4.87 trillion yuan from 1.56 trillion yuan in February. Analysts polled by Reuters had expected March TSF of 4.70 trillion yuan. ($1 = 7.2374 Chinese yuan renminbi)

(Reporting by Judy Hua and Kevin Yao. Editing by Jane Merriman)