New credit in the mainland could fall for the first time since 2008, amid a weakening real economy and banks' tightening liquidity.
Ratings agency Fitch adjusted its estimate for total societal financing (TSF), a measure of overall new credit, including that from outside the banking system, to 16.5 trillion yuan to 17 trillion yuan this year, down from last year's 17.5 trillion (HK$21.4 trillion).
'Weakening demand for credit as well as resource constraints from thinning bank liquidity has been weighing on bank lending,' said Charlene Chu, head of Chinese banks' ratings at Fitch.
The four largest banks extended new loans by about 250 billion yuan last month, Liu Yuhui, a senior researcher at the Chinese Academy of Social Sciences, told Bloomberg. Credit across all financial institutions grew by an estimated 700 billion yuan, the China Securities Journal said.
Most of the loans were made in the second half of May. This was an improvement compared to the uncharacteristically low loan issuances in April. The Big Four banks issued only 101.7 billion yuan in new loans in the first 25 days of April, the China Securities Journal reported.
Broad credit growth began to moderate in the second half of last year, and the slowdown had accelerated this year, said Chu.
Beijing has recently fast-tracked unfinished or unapproved projects from the last round of the stimulus package to boost the economy after a slackening off in April which had shocked the leadership after what seemed like a solid first quarter, Stephen Green, Standard Chartered China economist, wrote recently.