(Yicai) April 9 -- China's new loan issuance in March is expected to have fallen from a year earlier because of a slow recovery of the credit demand and a significant drop in bank discount rates at the end of last month, according to predictions from experts.

"New loans issued in March were likely around CNY3.2 trillion (USD442.6 billion), compared with CNY3.9 trillion in the same period last year, as discount rates rapidly declined on March 29, possibly indicating a weak credit demand," said Lin Yingqi, banking analyst at China International Capital Corporation.

On the last working day of last month, Chinese lenders significantly lowered their discount rates. Those for bills with a maturity of under six months dropped to 1.65 percent from 1.94 percent, while those with a three-month maturity fell to 1.7 percent from 2.2 percent.

In its latest research report, GF Securities predicted China to have issued CNY3.5 trillion worth of new loans in March. "The pressure for credit smoothing was mainly in the first quarter, with expectations for increased credit and a stabilization and rebound in social financing growth from this month," the securities firm noted.

China's loan balance is expected to have grown 9.6 percent in March from a year earlier, a slight decrease compared to February, Lin noted. This is also partly due to last year's high base, and it reflects regulatory guidance towards smoothing credit fluctuations.

Mortgage lending to residents is expected to have remained relatively weak last month due to low property sales, Lin added. The early repayment rate at mortgage-backed securities was 11.3 percent in February, down about 3 percentage points from a year earlier, indicating a potential decrease in the charge after the loan prime rate reduction in March, he pointed out.

China Construction Bank, the country's largest lender by mortgage volume, has seen a rebound in the volume of mortgages, especially for second-hand homes, since the beginning of last month, Vice President Li Yun previously said.

The adjustments in existing mortgage rates have helped reduce the motivation for early repayment to some extent, Li added, noting that the early repayment scale for the first quarter fell from the fourth quarter of last year.

This year's export and purchasing managers' index data have confirmed a transition to active restocking from passive destocking in both domestic and foreign inventory cycles, with some companies even having a proactive financing demand for capacity expansions, said Yang Xin, macroeconomic researcher at Hongta Securities.

With the increased issuance of government bonds and supplementary mortgage policies and the establishment of a real estate financing coordination mechanism, it is expected that there will be an increase in credit demand in the infrastructure and real estate sectors, Yang noted.

Editor: Futura Costaglione