Chinese banks extended 385.2 billion yuan (US$62.6 billion) of new yuan loans in July, marking a decline of 314.5 billion over the same month last year and the lowest level since 2010, China Business News reported Thursday, citing central bank data.
In June, new yuan loans amounted to 1.08 trillion yuan, according to previous data.
The central bank attributed the slump in bank lending last month to seasonal factors, falling deposits, and flagging loan demand due to downward pressure on the economy. Growing pressure on lenders to enhance their credit-assets quality also led to the weak loan growth, the paper said.
Wealth management products as well as new funds flowing into the stock market have resulted in a decline in bank deposits, which fell by 1.98 trillion yuan at the end of July.
Wen Bin, chief analyst with Minsheng Banking, was quoted as saying that credit risks are on the rise amid slowing economic growth. Banks are reluctant to lend to small firms and property-related sectors due to fears that bad loans may rise. Meanwhile, loan demand from some real-estate developers has also waned due to a downturn in property prices.
The plunge in new yuan loans has triggered speculation that the central bank will switch to a relatively loose monetary policy and reduce enterprises’ financing costs. Some analysts aver that a single month data shouldn’t be overstated. They argue that the July data is still in a reasonable zone considering the seasonal factors, as loans usually fall at the beginning of a new quarter after a lending spree at the end of the previous quarter.
The central bank reaffirmed its stance that it will maintain a prudent monetary policy, with fine-tuning done as and when necessary.
Li Huiyong, chief analyst with Shenyin Wanguo Securities, was cited as saying that the government may take further action to reduce financing costs and shore up the economy. The possibility of a rate cut should be watched around October when price pressures rise further, he said.
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