In May 2024, new bank loans in China rose less than anticipated, highlighting ongoing economic challenges. Chinese banks extended 730 billion yuan ($101 billion) in new loans, significantly down from March’s 3.09 trillion yuan and below the 800 billion yuan forecast by analysts. This decline is attributed to seasonal factors, a sluggish real estate market, and delayed government bond issuance.
The drop in new loans underscores the weak demand for financing within the real economy. Household loans, primarily mortgages, contracted by 516.6 billion yuan, in contrast to a 940.6 billion yuan increase in March. Similarly, corporate loans fell to 860 billion yuan from 2.34 trillion yuan in the previous month. Broad M2 money supply growth also slowed to 7.2% in May, down from 8.3% in April.
The People’s Bank of China (PBOC) has pledged to ensure ample liquidity and credit expansion to support economic recovery. Despite a faster-than-expected GDP growth of 5.3% in the first quarter, frail domestic demand continues to weigh on overall momentum. China’s economic growth target for 2024 is set at around 5%, but achieving this goal may prove challenging amid a sagging property market and tepid consumer demand.
Analysts believe the weak performance of new loans and bill financing in May highlights the subdued demand for financing from the real economy. The PBOC may need to consider additional measures to stimulate economic activity and bolster growth.