HONG KONG -- Chinese lending unexpectedly and drastically slowed in July to the lowest level since the depths of the global financial crisis as a weak property market appeared to drive down demand for new loans despite recent moves to ease credit.
A broad measure of new credit was $44.3 billion in July, the central bank reported on its website Wednesday. That is the lowest monthly total since October 2008, the month before China announced a huge stimulus program that was seen as crucial to the country's success in avoiding the deep recessions in the United States and Europe.
The plunge in new credit puts more pressure on China's economy, which is on track this year to grow at the slowest pace since the slowdown after the 1989 crackdown on the student democracy movement in Tiananmen Square. Economists said the figures might prompt the government to accelerate its efforts to increase growth, including reducing the amount of funds that banks must set aside as reserves.
"Today's monetary data should not be viewed lightly," Liu Li-Gang and Zhou Hao, economists with the Australia and New Zealand Banking Group, said in a note. "It means that the financial system is engaging a rapid deleveraging process, which could have significant repercussions on the real economy."
In an unusual step, the People's Bank of China, the central bank, issued a separate statement that offered some explanations for the weakness of the July credit figures.
It cited stricter supervision of the so-called shadow banking sector, the off-balance-sheet lending by banks and trust companies that has spurred talk of a looming banking crisis in China.
The central bank also said that July was traditionally a slow month for lending. In the early part of this month, the central bank said, new lending averaged $4.88 billion to $8.13 billion a day, a pace that, if maintained, would result in a big rebound.
The weak lending figures came as the country's economy gained some momentum in the second quarter, growing at 7.5 percent from the year-earlier period, a slight increase from the 7.4 percent growth in the first quarter. In June, the central bank lowered the amount of funds some regional banks had to keep as reserves, freeing them to lend more money. Still, those figures are far less than the double-digit gains routinely posted during the past three decades.
SundayMonday Business on 08/17/2014