China’s banks extended surprisingly fewer new yuan loans in July, while growth of money supply and total social financing also slowed, raising pressure on the central bank to ease policy further to support the slowing economy.
Chinese banks extended 1.06 trillion yuan (US$150.06 billion) in new yuan loans in July, down from June and falling short of analysts’ expectations, Reuters reports, citing data released by the People’s Bank of China.
Analysts polled by Reuters had predicted new yuan loans would fall to 1.25 trillion yuan in July, from 1.66 trillion yuan in the previous month.
Chinese banks usually make fewer loans in July after ramping up lending in June, but the data was lower than the tally in July 2018, when banks doled out 1.45 trillion yuan in new loans.
Household loans, mostly mortgages, fell to 511.2 billion yuan in July from 671.7 billion yuan in June, while corporate loans tumbled to 297.4 billion yuan from 910.5 billion yuan.
Broad M2 money supply in July grew 8.1 percent from a year earlier, central bank data showed, below estimates of 8.4 percent seen in the Reuters poll. It rose 8.5 percent in June.
Outstanding yuan loan grew 12.6 percent from a year earlier. Analysts had expected 12.8 percent growth, slower than June’s 13.0 percent.
Some analysts say the annual comparison is a better way to assess trends in China’s credit growth, rather than more volatile monthly readings.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.7 percent in July from a year earlier and from 10.9 percent in June, the news agency said.
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 July, TSF fell to 1.01 trillion yuan from 2.26 trillion yuan in June. Analysts polled by Reuters had expected 1.5 trillion yuan.
To free up more funds for lending and accommodate local government project financing, most analysts still expect the central bank will cut banks’ reserve requirement ratios (RRR) further in coming months, on top of six reductions since early 2018.
The central bank has pledged to improve its policy transmission mechanism to support small and private firms.
Highlighting debt concerns, the Politburo, a top decision-making body of the Communist Party, took the unusual step last month of announcing it would not use the property market as a form of short-term stimulus.
And regulators said last week they had launched nationwide bank inspections to determine if loans have been used illegally to fund property investment.
But analysts say continued policy support is needed, especially after a month-long trade truce with the United States was shattered earlier this month, when US President Donald Trump vowed to impose a 10 percent tariff on US$300 billion of Chinese imports from Sept. 1. The move would extend levies to effectively all of the goods China exports to the US.
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