Chinese bank lending in June fell short of expectations, while certain critical money indicators plummeted to unprecedented lows, according to data released on Friday by the People’s Bank of China (PBOC). This comes despite the central bank’s commitment to maintaining a supportive monetary policy to bolster the fragile economy.
The latest money and credit data underscored concerns over subdued demand, which continues to weigh on the world’s second-largest economy. The prolonged downturn in the property sector has dampened investment and undermined consumer confidence.
In June, banks extended 2.13 trillion yuan ($293.55 billion) in new yuan loans, up significantly from 950 billion yuan in May but lower than the 3.05 trillion yuan recorded a year ago. Analysts surveyed by Reuters had anticipated new yuan loans to rise to 2.25 trillion yuan during the month.
The PBOC does not provide monthly breakdowns, but Reuters calculated June’s figures based on data from January to June compared to the previous January to May period. For the first half of the year, new yuan loans totaled 13.27 trillion yuan.
Broad M2 money supply growth decelerated sharply in June, registering a historic low of 6.2% year-on-year, below both the Reuters poll forecast of 6.8% and the 7.0% recorded in May.
PBOC Governor Pan Gongsheng reaffirmed last month the central bank’s commitment to maintaining a supportive monetary policy stance. He emphasized using various policy tools, including interest rates and reserve requirement ratios, to foster a conducive monetary and financial environment for economic growth.
However, Pan acknowledged that the slowdown in China’s credit expansion is a natural consequence of economic restructuring, reduced lending to the property sector, and local government financing vehicles (LGFVs).
Despite robust export performance, the Chinese economy has yet to see a substantial recovery from the pandemic-induced crisis, given the sluggish housing market and tepid domestic demand.
The growth rate of outstanding yuan loans dropped to a record low of 8.8% year-on-year in June, down from 9.3% in May, below the 9.0% expected by analysts.
Annual growth in total social financing (TSF), a broad gauge of credit and liquidity in the economy, also slowed to 8.1% in June, another record low, from 8.4% in May.
China is scheduled to release its second-quarter GDP growth and June economic activity data on July 15. Investors are also eagerly awaiting the third plenum, a crucial meeting of top leaders from July 15 to 18, expected to outline medium- and long-term structural reforms.
Policy advisers anticipate potential tax and fiscal adjustments aimed at channeling more tax revenues to financially strained local governments to alleviate fiscal pressures.
