The headquarters of the People's Bank of China, the central bank, is pictured in Beijing, China, February 3, 2020. REUTERS/Jason Lee

BEIJING (Reuters) -New loans by Chinese banks fell sharply in October from the previous month and missed market expectations, as households and businesses remained wary of taking on more debt due to economic uncertainties and trade tensions between Beijing and Washington.

With private demand still weak amid the property downturn, policymakers are finding it hard to reflate the economy as Chinese consumers tighten their belts. Incremental policy support has yet to yield significant results.

"Bank loan growth continued to weaken in October, with the consumer loan subsidy scheme failing to put a floor under household loan growth," said Leah Fahy, economist at Capital Economics.

Banks made 220 billion yuan ($30.89 billion) in new loans last month, plunging from September's 1.29 trillion yuan, according to Reuters calculations based on data from the People's Bank of China (PBOC) on Thursday.

Analysts polled by Reuters had expected October loans would reach 500 billion yuan, matching the levels seen a year earlier, as seasonal factors that helped boost September's numbers wore off.

The Chinese central bank does not provide monthly breakdowns. Reuters calculated the October figure based on the bank's January-October data, compared with the January-September figure.

The PBOC said new yuan loans totalled 14.97 trillion yuan for the first 10 months of this year.

Outstanding loans rose 6.5% from a year earlier, a record low. Economists had expected growth of 6.6%, the same pace as in September.

Household loans, including mortgages, contracted by 360 billion yuan in October, versus an increase of 389 billion yuan in September, while corporate loans dropped to 350 billion yuan from 1.22 trillion yuan, according to Reuters calculations based on central bank data.

BATTLE AGAINST 'INSUFFICIENT DEMAND'

Analysts pointed out benefits from the government's 500 billion yuan policy-based financial tool aimed at boosting investment have yet to materialise.

While China and the U.S. reached a trade truce extension in late October, analysts said the tariff reductions will provide only a marginal boost to China's economy and continued economic and trade clashes between the two superpowers are inevitable.

Outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose 8.5% year-on-year in October, slowing from 8.7% a month prior and marking a seven-month low.

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

"We note that government bond issuance related to debt resolution is approaching an end, and the issuance of local government special bonds has also moderated," said Barclays analysts. They expected government bond issuance could gain pace in the coming months.

Government bond issuance has begun to taper off after a strong start to the year.

"The economy currently faces the challenge of insufficient demand," the Financial News, a PBOC publication, said in a commentary following the data release.

"By increasing the scale of government bond issuance, we can support the implementation of major projects and national strategic initiatives, thereby helping to expand demand and underpin economic growth."

In its third-quarter monetary policy implementation report released on Tuesday, the PBOC said it will keep liquidity ample while improving its policy transmission.

China is due to release key economic indicators for October on Friday.

($1 = 7.1230 Chinese yuan renminbi)

(Reporting by Liz Lee, Shi Bu, Ellen Zhang and Kevin Yao; Editing by Ros Russell (Ellen.Zhang@thomsonreuters.com;)