China yuan loans contract in July amid weak credit demand

China’s new yuan loans contracted in July for the second time this year, falling short of analyst expectations due to weak household credit demand and seasonal factors. Based on data from the People’s Bank of China, total new yuan loans shrank by 340 billion yuan ($50.43 billion) in July, marking the second contraction since April.

Outstanding yuan loans grew by 5.1% year-on-year in July, a slowdown from 5.2% in June and below the market consensus of 5.3%. The contraction in lending comes amid broader economic challenges, as official data indicated that factory activity, services, and construction all contracted during the month.

Specific sectors showed significant declines: household loans, including mortgages, shrank by 460.3 billion yuan, while corporate loans fell by 130 billion yuan. For the first seven months of the year, new loans totaled 10.38 trillion yuan, down from 12.87 trillion yuan during the same period last year. Chinese leadership has previously pledged to support growth by accelerating fiscal spending on approved infrastructure projects.