China's new bank lending falls more than expected in July

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China's new bank lending falls more than expected in July

BEIJING New bank lending in China fell more than expected in July, as the COVID flare-ups, worries about jobs and a deepening property crisis made companies and consumers more wary of taking on more debt.

In July, Chinese banks issued 679 billion yuan $101 billion in new yuan loans, less than a quarter of June's amount and falling short of analysts' expectations, according to data released by the People's Bank of China PBOC on Friday.

Analysts had predicted that the new yuan loans would fall to 1.10 trillion yuan in July, compared to 2.81 trillion the previous month and 1.08 trillion a year earlier.

In July, mortgages fell to 121.7 billion yuan from 848.2 billion in June, while corporate loans fell to 287.7 billion yuan from 2.21 trillion.

China's economy slowed sharply in the second quarter as widespread lockdowns hammered demand and business activity, while the property market fell from crisis to crisis.

The PBOC reiterated that it would step up its implementation of its prudent monetary policy and keep liquidity reasonably ample while closely monitoring domestic and external inflation changes, while keeping watch on domestic and external inflation changes, it said in its policy report.

A growing number of homebuyers have threatened to stop repaying mortgages on hundreds of stalled projects. While banks are urged to provide funds to fill developers' funding gap, confidence in the sector remains fragile.

In July, there was a drop in credit demand from manufacturing and services firms, with a slight increase in retail, which was attributed to fears of more lock-downs, according to China Beige Book International, which conducts monthly surveys of more than 1,000 firms.

A recent glut of liquidity in interbank money markets is a sign of weaker credit demand, according to analysts.

In July, the data from the central bank showed that the money supply of Broad M 2 increased 12 per cent from a year earlier, above estimates of 11.4 per cent in the Reuters poll.

Outstanding yuan loans increased 11 per cent compared to 11.2 per cent growth in June. The growth of outstanding total social financing TSF, a measure of credit and liquidity in the economy, slowed to 10.7 per cent in July from 10.8 per cent in June.

Analysts had predicted a drop in the TSF last month, as Bejing told local governments to use up most of their annual special bond quotas by the end of June.

The finance ministry data shows that there were 3.41 trillion yuan in special bonds issued in the first six months, a part of the 2022 special bond quota of 3.65 trillion, as authorities tried to quicken infrastructure spending.

There are 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 dropped to 756.1 billion yuan from 5.17 trillion in June. Analysts had predicted a TSF of 1.30 trillion yuan in July, according to analysts polled by Reuters.