China's May New Loans Miss Forecasts Amid Property Slump

China's credit expansion slowed in May, with new bank loans falling to 520 billion yuan, below forecasts and indicating weak private demand. This slowdown occurred despite efforts by the People's Bank of China (PBOC) to encourage lending.

Aggregate financing, a broader measure of credit, increased to ¥2.03 trillion ($300 billion), exceeding economists' median estimates. However, this figure represented an 11% decrease compared to the previous year. Household loans contracted for the second consecutive month, signaling subdued consumer confidence. While lending to non-financial companies saw an increase driven by bill financing, medium and long-term loans, which reflect corporate investment confidence, continued to decline.

Issuance of government bonds also lagged behind last year, contributing to the weaker overall credit figures. The PBOC has recently implemented measures to prevent borrowing costs from falling too low, including instructing major state-owned banks to curb interbank lending and draining liquidity from the system. Analysts suggest that ample liquidity and low financing costs may not be enough to boost credit demand, emphasizing the need for increased fiscal spending to stimulate it.