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China’s July Financial Data Reveals Mixed Trends in Credit and Deposits

China's July Financial Statistics Show Loan and Deposit Trends

China's financial statistics for July shows changes in loans and deposits, with mixed trends and economic implications.
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According to financial statistics released by the People’s Bank of China on August 13, the first seven months of 2024 have seen significant changes in the country’s financial landscape. RMB loans increased by 13.53 trillion yuan, marking a year-on-year rise of 2.55 trillion yuan. The scale of social financing expanded by 18.87 trillion yuan, up by 3.22 trillion yuan compared to the previous year.

Experts attribute the seasonal decline in new credit during July to the “squeezing water” effect and ongoing adjustments between old and new economic drivers. Despite a slight rebound in social finance growth, regulatory policies continue to influence money supply trends.

As of the end of July, the balance of broad currency (M2) stood at 303.31 trillion yuan, up 6.3% year-on-year. Narrow currency (M1) decreased by 6.6% year-on-year to 63.23 trillion yuan, while currency in circulation (M0) increased by 12% year-on-year to 11.88 trillion yuan. The net cash investment for the first seven months was 539.6 billion yuan.

Wen Bin, Chief Economist at Minsheng Bank, noted that monetary expansion has slowed significantly since April due to regulatory measures. The growth rate of M1 has remained negative, reflecting adjustments in financial data as inflated deposits and loans are corrected.

Domestic and foreign currency loans reached a total of 255.43 trillion yuan at the end of July, showing an 8.3% year-on-year increase. RMB loans specifically rose by 8.7%. The cumulative increase in social financing for the year stands at 18.87 trillion yuan, which is 3.22 trillion yuan less than the same period last year.

Credit resources are increasingly directed towards key economic areas, with significant growth in medium- and long-term loans for manufacturing, high-tech sectors, and small and micro enterprises. However, the seasonal decline in credit demand has been noticeable in July.

Wen Bin emphasized the need for continued support in key areas and adaptation to new economic realities. Future financial strategies should focus on improving resource efficiency, supporting new economic sectors, and enhancing the quality of credit.

Deposit data also showed a rise, with the balance of domestic and foreign currency deposits reaching 300.88 trillion yuan, a 6.2% year-on-year increase. RMB deposits specifically grew by 6.3% to 294.92 trillion yuan. The rise in deposits indicates a cautious approach by residents and businesses towards investment opportunities.

Bai Wenxi, a special tutor at the Graduate School of the Chinese Academy of Social Sciences, highlighted that these deposit trends could influence future central bank policies. Stable economic growth might prompt the central bank to maintain current policies, while slower growth could lead to measures such as interest rate adjustments or increased liquidity.

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