Key facts
- China's new bank lending is expected to fall to 45 billion yuan in July from 1.61 trillion yuan in June.
- Subdued credit demand and a seasonal slowdown are contributing factors.
- The People's Bank of China is expected to release loan and money supply data between August 10 and 15.
- Broader M2 money supply growth is projected to slow to 7.9% in July from 8% in June.
- Total social financing is estimated at 1.2 trillion yuan for July, down from 3.36 trillion yuan in June.
China's new bank lending in July is expected to see a significant drop, with economists polled by Reuters forecasting issuance to rise by only 45 billion yuan ($6.67 billion). This represents a steep decline from the 1.61 trillion yuan issued in June. Factors contributing to this anticipated slump include weak credit demand from both the private sector and households, as well as the typical seasonal slowdown and the unwinding of quarter-end lending activities seen in June.
The People's Bank of China (PBOC) is anticipated to release the official figures for July loans and money supply between August 10 and 15. Last year, China's bank lending unexpectedly contracted by 50 billion yuan in July, indicating a potential for weakness in the current period.
Analysts from Citi Research noted that credit demand could remain subdued, with households potentially resuming deleveraging. They also pointed to the low bills rate, which stayed near 0.5% throughout July, as an indicator that a rebound in credit demand is not imminent. The PBOC, however, has pledged to adjust its monetary policy tools to ensure ample liquidity and guide financial institutions to enhance credit supply.
Broader monetary indicators are also expected to show a slight moderation. The M2 money supply is forecast to have grown 7.9% year-on-year in July, a marginal decrease from the 8% recorded in June. Outstanding yuan loans, however, are estimated to have seen a slight increase to 5.3% year-on-year growth in July, up from 5.2% in June. Total social financing, a broader measure of credit, is likely to have reached 1.2 trillion yuan in July, a substantial decrease from 3.36 trillion yuan in the previous month, though it is up from 1.16 trillion yuan in July of the prior year.
Moody's Ratings, in a recent commentary, suggested that China's credit conditions would remain stable in the latter half of the year. They anticipate that fiscal and monetary support, strong exports, and technological advancements will counterbalance weak domestic demand. However, the agency also highlighted the need to address structural weaknesses for sustained medium-term growth. Moody's further noted that policy-directed lending to strategic sectors is expected to compensate for subdued private borrowing, with bank credit remaining the primary supply channel over the next 12 to 18 months.