China's new bank loans in July fall more than expected to $143bn

BEIJING: New bank lending in China fell more than expected in July from the previous month, but broad credit and liquidity growth quickened as the central bank sought to support a gradual economic recovery.

Chinese banks extended 992.7 billion yuan ($142.82 billion) in new yuan loans in July, down sharply from 1.81 trillion yuan in June and falling short of analyst expectations, according to data released by the People's Bank of China (PBOC) on Tuesday.

Analysts polled by Reuters had predicted new yuan loans would fall to 1.20 trillion yuan in July.

The new loans were lower than 1.06 trillion yuan a year earlier.

Household loans, mostly mortgages, fell to 757.8 billion yuan in July from 978.8 billion yuan in June, while corporate loans dipped to 264.5 billion yuan from 927.8 billion yuan.

A stronger-than-expected rebound in activity in the second quarter has reduced the urgency for the PBOC to ease policy further, but it will keep conditions accommodative to support the recovery, sources have told Reuters.

The central bank has already rolled out a raft of easing steps since early February, including cuts in reserve requirements and lending rates and targeted lending support for virus-hit firms.

China dropped its annual growth target this year for the first time since 2002 and pledged more government spending as the COVID-19 pandemic badly hurt the world's second-biggest economy.

PBOC Governor Yi Gang told Xinhua news agency over the weekend that the central bank will guide growth in M2 - a broad gauge of money supply - and total social financing this year to significantly exceed last year's rate.

Broad M2 money supply in July grew 10.7pc from a year earlier, central bank data showed on Tuesday, below estimates of 11.1pc forecast in the Reuters poll. It rose 11.1pc in June.

Outstanding yuan loans grew 13.0pc from a year earlier compared with 13.2pc growth in June. Analysts had expected 13.2pc growth.

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 12.9pc in July from 12.8pc in June.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In July, TSF fell to 1.69 trillion yuan from 3.43 trillion yuan in June.

Analysts polled by Reuters had expected July TSF of 1.85 trillion yuan.