Resident Loans Show Significant Increase in June, Reflecting Recovery in Consumption Willingness
July 14, 2023 – The latest financial statistics reveal a notable surge in resident loans in China during the month of June. According to data from the Economic Daily, resident loans increased by 963.9 billion yuan, marking a sharp increase of 115.7 billion yuan compared to the same period last year.
The significant growth in resident loans can be attributed to the recovery in the willingness to consume. A recent survey conducted by the People’s Bank of China indicates that 24.5% of residents expressed a tendency to “consume more” in the second quarter of this year, representing a 1.2 percentage point increase from the previous quarter. The data from the “618” mid-year shopping festival further supports this trend, with Taobao reporting over 2.56 million small and medium-sized merchants participating and higher turnover than the previous year.
The recovery in consumption willingness is primarily influenced by three factors in the short term: improvements in expectations, the recovery of service consumption, and increased borrowing convenience. As the economy and society return to normal operation since the beginning of the year, residents’ engagement in contact and gathering service consumption has accelerated. Income from various sectors such as catering, movies, and tourism has witnessed substantial growth, driven by holiday effects. Moreover, the optimism surrounding the prospects for automobile consumption, supported by the optimization of the new energy vehicle purchase tax reduction and exemption policy, has contributed to this trend. To stimulate domestic demand and promote consumption, several commercial banks have lowered consumer loan interest rates, introduced credit card consumption discounts, and integrated lending and financial services into different consumption scenarios, making consumer loans more accessible and practical.
Looking at the medium and long term, the recovery of consumption willingness is influenced by income improvement and borrowing cost reduction. The recent implementation of an interest rate cut, which saw the LPR (loan prime rate) drop by 10 basis points to 4.2% for periods exceeding 5 years, has led to reduced financial burdens on residents. This reduction in mortgage and other loan interest rates has not only eased costs for first-time homebuyers but has also fueled demand for second homes and stock loans, thus stimulating medium and long-term loan growth in June.
However, it is crucial to note that credit growth in June and the first half of the year overall still reflect the characteristic of “strong enterprises and weak residents.” Resident loans accounted for approximately 18% of the increase in RMB loans during the first half of the year, indicating that corporate loans were the primary driver of credit growth. While the proportion of the increase in resident loans rebounded to about 32% in June, it remains below the 50% level. Addressing the factors that restrict consumption growth and prioritizing the recovery and expansion of consumption are essential in improving residents’ consumption capacity and willingness to consume.
Moving forward, efforts must be made to overcome challenges and capitalize on momentum, encouraging residents to confidently, willingly, and easily consume. Strengthening confidence is key, considering China’s population of over 1.4 billion and improving per capita GDP. Policymakers should implement comprehensive strategies to expand effective demand through macro-policy regulation and optimize financial services in various sectors such as bulk consumer goods, elderly care, education, culture, and tourism. Additionally, city-specific policies aimed at supporting housing needs should be implemented. Lastly, increasing the income of urban and rural residents, maintaining employment stability and consumer price equilibrium, facilitating reasonable consumer credit, and implementing policies that promote consumption will contribute to economic recovery.
– Guo Ziyuan