By Peter Bergman (MoneyAmped.com)
According to a recent Reuters poll, China’s new yuan loans are expected to experience a significant decline in July compared to the previous month. This drop can be attributed to weak credit demand and seasonal factors. Despite this, the central bank continues to enhance policy support for the economy.
Based on the findings of a study conducted by 19 experts, Chinese banks are expected to have provided net new yuan loans of around 450 billion yuan ($62.80 billion) in the previous month. When compared to the 2.13 trillion yuan that was issued throughout June, this statistic reflects a substantial decline of about 79%.
On the other hand, the projected new loans would be more outstanding than the 345.9 billion yuan that was granted during the same month in the previous year.
Due to seasonal circumstances, experts believe that the amount of money that banks lend out normally decreases during the month of July.
The total amount of new loans that banks made in the first half of the year was 13.27 trillion yuan, which is somewhat less than the record of 15.73 trillion yuan set in the previous year.
Seasonal Factors Are the Main Reason for Changes in Indicators
According to analysts at Capital Economics, net new loans in July may have been affected by seasonal factors. However, year-on-year lending growth, which indicates the underlying trends, could show some stabilization.
“Based on that premise, it is likely that the growth of bank loans reached a stable point in July.” According to experts, the decline in home sales has shown signs of improvement in recent months. This positive trend is expected to have a positive impact on mortgage disbursements and ultimately lead to a decrease in the negative impact on lending to households.
According to the poll, there was an anticipation of an 8.8% increase in outstanding yuan loans last month compared to the same period the previous year, which is consistent with the growth rate observed in June.
The July figures for the growth of the broad M2 money supply were estimated to be 6.1%, showing a slight decrease from the 6.2% recorded in June. This information is based on a survey conducted among 26 economists.
PBOC Has Some Tough Decisions Ahead of It
In a surprising move last month, the People’s Bank of China (PBOC) decided to lower key interest rates, including the rate on its medium-term lending facility (MLF) operation, with the aim of strengthening economic growth.
During a meeting last week, the PBOC committed to reducing financing costs and intensifying efforts to make adjustments that counteract cyclical trends.
Business investment and consumer confidence have been negatively impacted by a long-lasting decline in property values and a lack of optimism regarding household income growth. In July, export growth decreased, while consumer prices experienced a higher-than-anticipated increase. This can be attributed, in part, to disruptions in food supplies caused by weather conditions.
It is predicted that more statistics on retail sales, industrial production, and investment will be provided in the following week. This will provide additional insights into the economic momentum that will be present throughout the latter half of the year 2024 by giving further information.
A rise in the issue of government bonds might encourage the expansion of total social finance (TSF), an all-encompassing measure of credit and liquidity in the national economy. The growth rate of TSF decreased from 8.4% in May to 8.1% in June.
The total supply of goods (TSF) is expected to decline to 1.1 trillion yuan in July, which is a reduction from the 3.3 trillion yuan that it was in June.
