In a recent report by Epoch Times on August 13, 2024, it was highlighted that the Chinese economy is experiencing a downturn with a lack of market confidence leading to a continued decline in lending willingness. In July, new loans amounted to approximately 260 billion yuan, marking a significant decrease from June and hitting a new low in nearly 15 years.
On August 13, the People’s Bank of China released financial statistics showing that in the first seven months, Chinese yuan loans increased by 13.53 trillion yuan, which is 2.54 trillion yuan less compared to the same period last year. The cumulative increase in social financing amounted to 18.87 trillion yuan, down by 3.22 trillion yuan from the previous year.
Looking at the data for a single month, new loans in July were around 260 billion yuan, the lowest since October 2009, showing a notable decline from June’s 2.13 trillion yuan and a decrease of 859 billion yuan from the same period last year, where new social financing in July was 770.8 billion yuan.
The July increase in new loans was below the median expectation of 400 billion yuan derived from economists surveyed by The Wall Street Journal. Financial news outlet Caixin recently conducted a survey among 14 domestic and foreign institutions, revealing that economists had an average prediction of 473.54 billion yuan for new loans in July and a range of 200 billion to 830 billion yuan. Additionally, their average forecast for new social financing in July was 1.1 trillion yuan, with a range of 700 billion to 1.3 trillion yuan. The central bank’s data indicated that the July increases in social financing and credit were close to the lower bound of market expectations.
It was noted that the magnitude of the decrease in new loans in July compared to the previous month, as reported by The Wall Street Journal, reflects the persistent caution among Chinese households and companies in increasing debt amid a continued slump in the real estate market and uncertain economic prospects. Efforts by the Chinese government to stimulate credit demand have yet to convince borrowers.
In July, the total volume and structure of new credit were weak on both the public and residential sides, with a noticeable impact on bill financing. Specifically, in July, corporate loans increased by 130 billion yuan, a decrease of 107.8 billion yuan from the previous year. Short-term loans decreased by 550 billion yuan, while medium and long-term loans increased by 130 billion yuan. Bill financing saw an addition of 558.6 billion yuan, and loans from non-bank financial institutions increased by 205.7 billion yuan.
Caixin noted that in July, there was a simultaneous increase in undiscounted bank acceptances in bill financing and new loans in social financing, while repayments of short-term loans by enterprises exceeded seasonal patterns, leading to a continued decline in financing demand in the real economy. An analyst explained that “banks using bills for loans reflect poor corporate financing demands.”
Household loans in July decreased by 210 billion yuan, with a year-on-year reduction of 9.3 billion yuan. Short-term household loans decreased by 215.6 billion yuan, while medium and long-term loans increased by 10 billion yuan.
Chief economist at Minsheng Bank, Wen Bin, stated that regarding short-term household loans, there was a higher willingness for residents to travel during the summer, leading to continued service consumption optimism. However, residents remain relatively cautious in their risk preferences, with uncertainties surrounding employment and income growth hindering an expansion of credit. The lackluster real estate sales combined with early repayment pressures continue to restrain the overall performance of medium and long-term household loans.
Ming Ming, chief economist at CITIC Securities, pointed out that short-term loans are still declining, indicating a weaker consumer willingness, while medium and long-term loans have increased year-on-year. It will be interesting to observe the impact of policies in the real estate sector on residents’ willingness to purchase homes.
Furthermore, in the first seven months, deposits increased by 10.66 trillion yuan, with household deposits showing an increase of 8.94 trillion yuan and non-financial corporate deposits decreasing by 3.23 trillion yuan.
In terms of monetary supply, by the end of July, broad money supply (M2) stood at 303.31 trillion yuan, showing a 6.3% year-on-year increase. Narrow money supply (M1) was at 63.23 trillion yuan, representing a 6.6% year-on-year decrease. The M2-M1 narrow money ratio was at -12.9%, further expanding from -11.2% at the end of June.