China’s bank lending weakened in July, suggesting Beijing’s stimulus efforts not working

Chinese banks extended 1.06 trillion yuan (US$150.17 billion) in net new loans last month, down from 1.66 trillion yuan (US$235.17 billion) in June

There was an eye-catching drop in corporate lending in July, plunging by two-thirds to 297.4 billion yuan (US$42.1 billion) from 910.5 billion yuan the month before

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Women walk by a bank window panel displaying the security markers on the latest 100 yuan notes in Beijing. Photo: AP

Published: 8:34pm, 12 Aug 2019Updated: 11:40pm, 12 Aug 2019

Chinese monetary data for July was weak across the board, suggesting that Beijing’s efforts to galvanise new lending are not having the intended effect.

Chinese banks extended 1.06 trillion yuan (US$150.17 billion) in net new loans last month, down from 1.66 trillion yuan (US$235.17 billion) in June, according to the data released by the People’s Bank of China on Monday.

July’s lending was well below the 1.25 trillion added bank credit predicted by a Bloomberg survey of economists, and was the lowest level since April, when banks issued 1.02 trillion yuan in new loans.

The slump raises questions over the need for additional credit easing – when a central bank sets lower interest rates, for example – from the People’s Bank of China (PBOC) to offset the effect of a weakening economy and the impact of the protracted trade war with the United States.

There was an eye-catching drop in corporate lending in July. New corporate loans plunged by two-thirds to 297.4 billion yuan from 910.5 billion yuan the month before. Photo: Reuters

As a rule, lending generally declines in July on a monthly basis, since it is the first month in the third quarter. Bank lending ordinarily spikes towards the end of a quarter. However, the decline this year was larger than expected, well below the corresponding 1.45 trillion yuan in new loans in July 2018.