China's New Loans Unexpectedly Fell in July — Update

China's new bank lending unexpectedly contracted in July as the central bank sought to shift attention away from loans as the main measure of financing.

New loans stood at a minus 340 billion yuan last month, compared with the 1.61 trillion yuan in June, official data showed Friday. Economists surveyed by The Wall Street Journal had expected CNY280 billion in new loans.

The surprise contraction partly reflected seasonal factors but also showed weak demand for borrowing as China's yearslong property slump continued.

"New bank loans posted a record contraction, reflecting outright household loan repayments and contracting long-term corporate loan demand." Barclays economists said in a note.

Sluggish housing activity and poor labor market sentiment continued to depress household credit demand, while lingering anxieties about income and employment prospects further dampened consumers' willingness to borrow, the investment bank said.

Similarly, the corporate sector remained hesitant to make long-term investments, leading to a contraction in long-term corporate loan demand for the month, Barclays added.

Chinese authorities are urging investors to assess loans and bonds together instead of relying solely on bank lending as a gauge of broad financing demand, as China's economy undergoes structural changes.

The People's Bank of China said in a report published Wednesday that the shift to "new productive forces" is structurally changing China's credit needs. Because these emerging industries are asset-light compared to traditional, capital-intensive sectors like real estate and infrastructure, the volume of bank credit required per unit of economic growth has dropped, resulting in a natural decrease in traditional loan demand.

In the meantime, alternative funding channels--notably bonds and equities--are growing in importance, the bank noted.

"Memory chipmaker CXMT's recent landmark IPO is illustrative of how tech firms are turning to the equity markets for funding," Pantheon Macroeconomics economists said following the data release.

Changes to interbank bond rules in March encouraged underwriters to bring artificial-intelligence firms, chipmakers, "unicorns" and other hard-tech firms to the bond market by promoting new credit-rating methodologies that give more weight to core technology and research and development capabilities, Pantheon economists said.

Total social financing, a broader measure of credit that includes non-bank financing, came in at 1.41 trillion yuan, official data showed Friday.

M2, the broadest measure of money supply, rose 7.7% on year in July, slowing from 8.0% growth in June and missing economists' forecast of 7.9%.

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(END) Dow Jones Newswires

August 14, 2026 07:02 ET (11:02 GMT)