Fall in bank loans sparks concerns
Print Edition
NEW Bank lending in China plunged surprisingly in July to the lowest in nearly five years after an exceptionally strong growth in June, raising concerns over economic momentum.
Banks in China extended 385.2 billion yuan (US$62.6 billion) in new yuan loans in July, only a third of the amount in June and 314.5 billion yuan less than July last year, the People’s Bank of China said in a statement yesterday.
Last month’s credit grew the least since December 2009, and missed economists’ downward revision for 727.5 billion yuan after the June surge, according to a Reuters poll.
Total social financing, the broadest measure of credit supply, including loans, bank acceptance bills, corporate bonds and equity financing, fell to a six-year low of 273.1 billion yuan, one seventh of that in June and a third of that a year earlier.
The PBOC issued an unusual immediate explanation for the July data reassuring the market that a slowdown in financing was reasonable following the surge in June, and that there’s no change to an accommodating stance to ensure stable credit supply.
The outlook is positive as banks were lending between 30 billion and 50 billion yuan per day in the first half of August, the PBOC said, at which pace the August lending could again top 1 trillion yuan.
But the PBOC conceded demand has been weaker amid an economic slowdown and a cooling property market.
The PBOC said banks now are more cautious in extending loans and avoiding risky sectors after the bad loan ratio rose for 11 consecutive quarters.
Economists, however, are worried that risk aversion among financial institutions may further pressure the economy.
“Beside seasonal volatility, we think the negative surprise in the loan data reflects the downside risks to growth, such as overcapacity and the housing downturn,” HSBC said yesterday. “The sharp contraction in short-term corporate lending as well as non-bank credit activity suggests that banks’ risk aversion is indeed on the rise.”
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