In July this year, increase in China’s social financing, which reflects the financial support for the real economy, amounted to RMB 528.2 billion ($74 billion), decreasing by RMB 270.3 billion compared to the same period last year, according to the People’s Bank of China (PBOC).
Moreover, in July, new Chinese currency loans totaled RMB 345.9 billion ($48 billion), decreasing by RMB 349.8 billion ($49 billion). Even though traditionally July is one of the slowest months due to seasonal factors, the new Chinese currency loans were far below the expectations most analysts, falling to the lowest level of the past 10 years, reflecting the slack performance of the real estate market which has negatively affected financial data, and also showing the insufficient demand in the current economy.
The financial data in July were lower than market players’ expectations even despite positive signals from the government. For instance, Chinese policymakers have issued polices to reduce taxes, cut the interest rates for mortgage loans which have been disbursed, and to stabilize the private economy, aiming to boost economic development in China. Most market sources agree that more stimuli will be needed to support the economy and the real estate sector. Chinese property giant Country Garden came closer to default after its onshore bonds were suspended.
The weak credit data have impacted steel and raw material futures prices as confidence in the construction sector has decreased. Rebar and HRC at Shanghai Futures Exchange have lost 0.8 percent on Monday compared to Friday, while iron ore futures at Singapore Exchange (SGX) have dropped by 2.24 percent to $100.45/mt over the same period.