China’s new bank loans hit lowest since 2009 in July, overall credit growth slowed

 

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China’s new bank loans hit the lowest level in more than 13 years in July and the overall credit growth also slowed even after the authorities cut interest rates and vowed to roll out more support to bolster the faltering economy.

Chinese banks extended 345.9 billion yuan of new yuan loans in July, slumping by 89% from the previous month to hit the lowest level since late 2009 and falling far short of analysts’ forecasts, data from the People’s Bank of China showed on Friday.

Lending in China typically tends to fall back in July due to seasonal factor, but the weak figures come days after other grim data which showed the world’s second-largest economy slipped into deflation last month while exports and imports plummeted.

In breakdown, new bank loans to the corporate sector, which had been the main driving force for the country’s new bank lending in past few months, fell to 237.8 billion yuan in July, marking the lowest level in nearly three years, showed the data.

Bank loans to the household sector contracted by 200.7 billion yuan in July after two months’ expansion, with short-term loans to falling by 133.5 billion yuan and medium- and long-term loans falling by 67.2 billion yuan, according to the data.

The new bank loans in July were mainly driven by new bill financing which reached 359.7 billion yuan and new bank loans to non-banking financing institutions reached 217 billion yuan, marking a new high in nearly four years, showed the data.

China’s outstanding yuan loans grew by 11.1% in July from a year earlier, the slowest pace so far this year, compared with 11.3% growth the previous month. Analysts had expected 11.3% growth.

Broad M2 money supply grew by 10.7% in July from a year earlier, according to the data, decelerating from 11.3% in June and the slowest pace since April 2022. Analysts had expected it to expand by 11%.

Outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, grew by 8.9% in July from a year earlier, slowing from 9% in June.

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 slumped to 528.2 billion yuan from 4.22 trillion yuan in June. Analysts polled by Reuters had predicted July TSF at 1.1 trillion yuan.

In breakdown, the net financing from government bond issuance reached 410.9 billion yuan in July, while net financing from corporate bond issuance reached 117.9 billion yuan, showed the data.