By Kevin Yao and Shi Bu
BEIJING, Aug 14 (Reuters) - China's new yuan loans posted a record contraction in July, missing forecasts as seasonal factors and weak household credit demand weighed on lending in the world's second-largest economy.
New yuan loans were down by 340 billion yuan ($50.4 billion) in July - the largest decline on record and the second contraction this year, after April - Reuters calculations based on People's Bank of China data released on Friday showed.
"This weakness in loan demand
comes despite the fact that nominal bank lending rates have continued to edge down," Capital Economics said in a note. "The recent uptick in inflation means that, in real terms, bank lending rates have fallen sharply this year."
Analysts polled by Reuters had expected new yuan loans in July to reach 45 billion yuan, versus 1.61 trillion in June and a fall of 50 billion a year earlier.
Chinese banks typically slow lending after front-loading credit ahead of the end of the June quarter.
The PBOC does not issue monthly breakdowns. Reuters calculated the July figure using the central bank's data for January to July, compared with the January to June figure.
New loans totalled 10.38 trillion yuan for the first seven months of this year, the PBOC data showed, down from 12.87 trillion a year earlier.
Outstanding yuan loans grew by 5.1% in July from a year earlier, down from 5.2% in June at a record low and missing the market consensus of 5.3%.
Signs of a sustained recovery in credit growth remain scant as households continue deleveraging and private-sector borrowing demand stays subdued.
Official data showed China's factory activity as well as services and construction activities all contracted in July.
Household loans, including mortgages, shrank by 460.3 billion yuan last month after a rise of 264.6 billion in June, while corporate loans fell by 130 billion after a rise of 1.5 trillion, according to Reuters' calculations.
PBOC VOWS NEW MEASURES BUT AGRESSIVE EASING SEEN UNLIKELY
China's top leaders pledged last month to bolster growth by accelerating fiscal spending on already approved infrastructure projects through year-end, rather than by planning major new stimulus measures.
On Wednesday, the PBOC said it would maintain an appropriately loose monetary stance and roll out practical, effective measures as needed, but gave few details and stopped short of signalling explicit cuts to policy rates or banks' reserve-requirement ratio.
"The PBOC doesn’t seem particularly worried about the recent weakness in the credit data," Capital Economics said. It added that it still expects around 30 basis points of rate cuts over the coming year.
The central bank-backed Financial News said investors should look beyond bank loans alone and assess financing alongside bond issuance and other funding channels, reflecting China's increasingly diversified credit system.
In 2025, loans accounted for 45% of the increase in total social financing, while bond and equity financing combined made up 47%, surpassing loans for the first time, according to the central bank.
Broad M2 money supply grew 7.7% in July from a year earlier, PBOC data showed, a 16-month low and below analysts' forecast of 7.9%, and down from 8% in June.
Outstanding total social financing - a broad measure of credit and liquidity - rose by 7.4% in July from a year earlier, but was unchanged from June. Any acceleration in government bond issuance could boost such financing.
(Reporting by Kevin Yao and Shi Bu; Editing by Sam Holmes and Clarence Fernandez)
