Chinese banks have issued a smaller-than-expected amount of new loans in July, indicating weak credit demand despite the government’s efforts to encourage lending to businesses and households.
Decrease in New Loans
According to data released by the People’s Bank of China, new loans extended by banks in China amounted to 345.9 billion yuan ($47.93 billion) in July. This figure is significantly lower than the 3.05 trillion yuan loaned out in June.
Below Expectations
Economists surveyed by The Wall Street Journal had predicted a decline in new loans due to seasonal factors. However, the actual amount of new loans was considerably lower than their median forecast of 800 billion yuan.
Decline in Total Social Financing
In addition to bank credit, total social financing, which includes non-bank credit as well, also experienced a sharp decline. It stood at 528.2 billion yuan in July, compared to 4.22 trillion yuan in June.
Money Supply Growth Slows
M2, the broadest measure of money supply, grew by 10.7% in July compared to the same period last year. This is lower than the 11.3% increase observed in June. Economists had anticipated a jump of 11.0%.
Implications for Economic Growth
If the weak lending momentum persists, it could have negative implications for China’s economic growth in the second half of the year.
