Key facts
- China's new yuan loans contracted by 340 billion yuan in July.
- This is the second loan contraction in 2026, following April.
- Analysts had expected 45 billion yuan in new loans for July.
- Household loans, including mortgages, shrank by 460.3 billion yuan.
- Outstanding yuan loans grew 5.1% year-on-year, a record low.
- M2 money supply growth slowed to 7.7% in July.
China's new yuan loans contracted by 340 billion yuan in July, marking the second contraction this year and falling short of analyst expectations. This decline, attributed to seasonal factors and weak household credit demand, underscores the challenges in stimulating credit growth in the world's second-largest economy.
Analysts polled by Reuters had anticipated new yuan loans to reach 45 billion yuan for July, a significant miss compared to the actual contraction. This follows a 1.61 trillion yuan increase in June and a 50 billion yuan contraction a year earlier. The contraction in April was 10 billion yuan.
Chinese banks typically slow lending after front-loading credit ahead of the end of the June quarter. The People's Bank of China (PBOC) does not issue monthly breakdowns, leading Reuters to calculate the July figure by comparing cumulative data for January-July with January-June.
For the first seven months of the year, new loans totaled 10.38 trillion yuan, a decrease from 12.87 trillion yuan in the same period last year. Outstanding yuan loans grew by 5.1% in July from a year earlier, down from 5.2% in June and missing market consensus of 5.3%.
Signs of a sustained recovery in credit growth remain scarce as households continue to deleverage and private-sector borrowing demand stays subdued. Official data indicated that China's factory activity, services, and construction activities all contracted in July.
Household loans, including mortgages, shrank by 460.3 billion yuan in July, a reversal from a 264.6 billion yuan rise in June. Corporate loans fell by 130 billion yuan, following a 1.5 trillion yuan increase in the previous month.
China's top leaders have pledged to bolster growth by accelerating fiscal spending on approved infrastructure projects through year-end, rather than planning major new stimulus measures. The PBOC stated it would maintain an appropriately loose monetary stance and implement effective measures as needed, without signaling explicit cuts to policy rates or reserve-requirement ratios.
Broad M2 money supply grew 7.7% in July from a year earlier, below analysts' forecast of 7.9% and down from 8% in June. Outstanding total social financing rose by 7.4% year-on-year in July, unchanged from June. An acceleration in government bond issuance could boost this financing measure.