China’s new bank loans fell more than expected in July to their lowest in nine months while broad credit growth hit a 17-month low, adding to market expectations that modest policy easing may be needed to underpin the country’s economic recovery.
The world’s second-largest economy has largely rebounded from massive disruptions caused by the pandemic last year, but recent new outbreaks of the Delta variants and severe flooding threaten to slow its recovery.
Go deeper with GlobalData
Chinese banks extended 1.08 trillion yuan ($166.5bn) in new yuan loans in July, well down from 2.12 trillion yuan in June and the weakest level since October 2020, according to data released by the People’s Bank of China (PBOC).
Analysts polled by Reuters had predicted new yuan loans would fall to 1.20 trillion yuan. Despite the drop, the total was still higher than 992.7 billion yuan a year earlier.
Markets are waiting for additional stimulus
Household loans fell to 405.9 billion yuan in July from 868.5 billion yuan in June, possibly due to tougher property financing requirements, while corporate loans dropped to 433.4 billion yuan from 1.46 trillion yuan, according to Reuters calculations based on central bank data.
Still, Chinese banks doled out a record 12.76 trillion yuan in new loans in the first half of 2021, even as the PBOC sought to cool broader credit growth to rein in debt risks amid rising defaults.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataFinancial markets are increasingly looking for signs that authorities will announce additional stimulus as post-Covid growth rates moderate.
In July the PBOC cut the reserve requirement ratio (RRR) for banks, releasing around 1 trillion yuan in long-term liquidity, and analysts expect another RRR cut this year.
Analysts are lowering China’s growth forecasts for the second half of the year
“After stabilising in June, broad credit growth resumed its downward trajectory in July and is now at its slowest since February last year,” Capital Economics said in a note to clients.
“We expect the slowdown and resulting headwind to the economy to continue in the coming months, further RRR and policy rate cuts notwithstanding.”
Many analysts are lowering growth forecasts for the second half of the year as China imposes restrictions to contain an outbreak of the Delta variant, which is dampening activity, particularly in services such as tourism, retail and restaurants.
Continued curbs on property speculation, higher raw material prices, tougher pollution controls and severe flooding in parts of the country are also weighing on growth.
