RMB Loans and Social Financing in China Experience Sharp Decline
According to data released by the People’s Bank of China, RMB loans increased by 345.9 billion yuan in July, and social financing increased by 528.2 billion yuan. However, these figures represent a significant drop compared to the previous month’s data. In June, RMB loans increased by 3.05 trillion yuan, and the scale of social financing increased by 4.22 trillion yuan.
The decline in loans and social financing in July is concerning as it further confirms the weak economic recovery in the second and third quarters. The unexpected recovery of these two data points in June was short-lived and did not sustain in the following month.
Compared to July of the previous year, all four indicators also show a decline. RMB loans and the scale of social financing increased by 679 billion yuan and 756.1 billion yuan respectively in July 2022. This year, these numbers dropped significantly, with RMB loans increasing by 345.9 billion yuan and the scale of social financing increasing by 528.2 billion yuan.
The surge in loans and social financing earlier this year, particularly in January, was attributed to the easing of pandemic restrictions as the country successfully passed the infection period. The demand for funds in the real economy increased, prompting a spike in loans and social financing. However, the recent decline suggests a slowdown in economic recovery.
Furthermore, the growth rate of credit and M2 in July fell below expectations. Chinese banks’ new RMB loans were projected to be 800 billion yuan, but the actual figure was lower. M2, a measure of money supply, increased by 11.0% year-on-year, also below expectations.
The meeting of the Political Bureau of the Central Committee held in July acknowledged the economic difficulties faced by the country. In response, the committee emphasized the need to strengthen macro policy regulation, boost domestic demand, enhance confidence, and address potential risks.
Investors are now anticipating comprehensive regulation from the Chinese government, covering monetary, fiscal, property market, and even capital market policies.
It remains to be seen how the Chinese government will address the challenges and stimulate economic growth in the coming months.
(This article is from Dow Jones Newswires)