China’s new bank lending is expected to plunge in July as subdued credit demand and the seasonal slowdown following June’s quarter-end lending push weigh on borrowing activity.
A Reuters poll of 20 economists showed new yuan loans were expected to rise by just 45 billion yuan (US$6.67 billion) last month, sharply down from 1.61 trillion yuan in June.
The People’s Bank of China (PBOC) is expected to release its July lending and money supply data between Aug 10 and 15. In July last year, new bank lending unexpectedly contracted by 50 billion yuan.
Citi Research said private-sector credit demand could remain subdued, while households may resume deleveraging in July. It added that a rebound in credit demand appeared distant as bills rates remained close to 0.5% throughout the month.
The PBOC pledged at a meeting on Aug 1 to adjust monetary policy tools in a timely manner, maintain ample liquidity and encourage financial institutions to improve the balance of credit supply.
Broader M2 money supply was expected to have grown 7.9% year-on-year in July, slightly slower than the 8% growth recorded in June, the poll showed.
Outstanding yuan loans were estimated to have grown 5.3% year-on-year in July, compared with 5.2% growth in June.
Total social financing, a broad measure of credit and liquidity, was expected to fall to 1.2 trillion yuan in July from 3.36 trillion yuan in June, although it would remain around 3.4% higher than the 1.16 trillion yuan recorded a year earlier.
Moody’s Ratings said China’s credit conditions should remain stable in the second half of the year, with fiscal and monetary support, strong exports and technological advances helping offset weak domestic demand.
However, the ratings agency said medium-term economic growth would depend on addressing structural weaknesses. It expects policy-directed lending to strategic sectors to offset subdued private borrowing, with bank credit likely to remain the primary channel for credit supply over the next 12 to 18 months.
