China bank lending tumbles more than expected on tepid credit demand

Chinese banks extended 260 billion yuan ($36.26 billion) in new yuan loans in July, down nearly 88% from the previous month and also missing analysts' forecasts

China's bank lending tumbled more than expected in July, dragged down by tepid credit demand and seasonal factors even as the central bank vowed to step up policy support for the economy.
 

Chinese banks extended 260 billion yuan ($36.26 billion) in new yuan loans in July, down nearly 88 per cent from the previous month and also missing analysts' forecasts, according to data released by the People's Bank of China (PBOC) on Tuesday.
 

Analysts polled by Reuters had predicted new yuan loans would come at 450 billion yuan last month, noting that July is traditionally a weak period for credit expansion Last month's new yuan loans dipped from June's 2.13 trillion yuan and compared with 345.9 billion yuan a year earlier.
 

Banks extended 13.53 trillion yuan in new yuan loans in the first seven months of this year, the PBOC said.
 

The central bank did not provide a single month breakdown for July but Reuters calculated the figure based on the bank's Jan-July data, compared with Jan-June.
 

China's economic growth missed forecasts in the second quarter, while July economic indicators also offered little cheer as export growth slowed and consumer inflation got a boost only due to weather disruptions to food supplies.
 

The PBOC pledged to guide credit to grow reasonably and steadily lower companies' financing and household credit costs, the bank said in its second-quarter monetary policy implementation report published last week.
 

At a meeting earlier this month to discuss policies for the second half of 2024, the PBOC said it would step up financial support to the broader economy and efforts would be directed more at consumers to spur consumption.
 

To bolster growth, the PBOC unexpectedly conducted a medium-term lending facility (MLF) operation on July 25 and cut the interest rate, while five of China's major state-owned banks on the same day cut deposit rates to cushion a hit to their already record low margins.
 

Last month, broad M2 money supply rose 6.3 per cent versus a year earlier, beating the 6.1 per cent forecast in a Reuters poll and a record low of 6.2 per cent in June.
 

Outstanding yuan loan growth slowed to 8.7 per cent from a year earlier, compared with 8.8 per cent in June. Analysts had expected an 8.8 per cent gain.
 

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, speeded up to 8.2 per cent from 8.1 per cent in June.
 

In July, total social financing fell to 770 billion yuan, compared with forecasts of 1.1 trillion yuan, and 3.3 trillion yuan in June.


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