China’s Total Social Financing Growth Slows as Shadow Banking Shrinks
What’s new: Growth of total social financing in China slowed in the first half as the crackdown on shadow banking decreased off-balance sheet borrowing and as bond issuance returned to normal after a surge last year to offset the pandemic’s economic impact.
Outstanding total social financing, a broad measure of credit and liquidity in the economy, increased by 17.74 trillion yuan ($2.74 trillion) to 301.56 trillion yuan in the first six months, data from the central bank show. The increase was 3.13 trillion yuan less than in the same period last year.
In the first six months of this year, entrusted loans, trust loans and undiscounted bank bills of acceptance, which are core shadow banking assets, decrease by 843.6 billion yuan, while renminbi loans to the real economy increased by 613.5 billion yuan from the same period a year ago.
Banks have provided solid support to key sectors, such as manufacturing, infrastructure and services excluding real estate, and the credit supply structure has been continuously optimized, said Ruan Jianhong, spokesperson and director of the People’s Bank of China’s Investigation and Statistics Department, at a press conference Tuesday.
At the end of June, real estate loans increased 9.5% to 50.8 trillion yuan, 2.2 percentage points slower than at the end of last year, Ruan said. Growth in loans to developers and mortgages to homebuyers slowed from last year.
The central bank will stick to a prudent, flexible and reasonable monetary policy and expects total social financing to grow steadily, basically in line with the nominal GDP growth rate, Ruan said.
The background: China is stepping up pressure on financial institutions to control the growth of real estate loans after it imposed a cap on property lending by big banks in December as part of a campaign to cool a roaring property market and prevent systemic risks in the financial system.
Banks were also fined for failure to review personal consumption loans and business loans that were used to buy real estate. In March, the China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development and the central bank ordered a nationwide inspection of business loans, targeting borrowers illicitly using individual or corporate business credit to speculate in the housing market.
Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.
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