CX Weekly Briefing: Bank Lending Falls for First Time in Decades

A summary of recent developments in and around China over the past week is as follows:

[para. 2] In finance and economics, China’s bank lending has shown a worrying trend, as July marked the first contraction in new loan issuance in two decades. According to the People’s Bank of China, new yuan-denominated loans fell by 50 billion yuan ($6.95 billion), a sharp reversal from previous years. Aggregate financing also underperformed, amounting to 1.16 trillion yuan, below expectations. This weakening of credit demand highlights challenges for Beijing in encouraging corporate and household borrowing to support economic growth, despite seasonally weaker lending in July.

[para. 3] Meanwhile, consumer price levels in China remained flat year-on-year in July, following a slight rebound the previous month. The stagnant CPI is attributed mainly to lower food prices and comparison with high prices a year earlier. Core CPI growth accelerated slightly to 0.8%, while factory-gate prices (PPI) continued their decline at -3.6% year-on-year, unchanged from June. Government measures aimed at curbing excessive competition led to modest price recovery in some industrial sectors.

[para. 4] To spur domestic demand, Beijing announced new policies subsidizing interest payments on personal consumer loans (excluding credit cards) and loans to service sector businesses. The plan will provide a 1 percentage point fiscal subsidy on eligible loans up to 1 million yuan ($139,000), with the program running from September 2025 to August 2026. Banks and companies in key industries such as dining and tourism are preparing for these measures, awaiting further implementation details.

[para. 5] On the international front, China’s commerce ministry imposed sanctions on two Lithuanian banks—UAB Urbo Bankas and AB Mano Bankas—in retaliation for the EU adding two Chinese financial institutions to its sanctions list over Russia. Chinese people and organizations are now prohibited from dealings with these banks, marking a tit-for-tat move amid ongoing geopolitical friction between China and the EU.

[para. 6] In business and technology, Nvidia Corp. clarified its compliance with U.S. regulations after rumors it agreed to remit 15% of its Chinese AI chip sales revenues to the U.S. government. The company denied any agreement of this nature but confirmed ongoing adherence to U.S. trade rules, including the recently reauthorized sale of its H20 AI chips to China. Accusations of security vulnerabilities in Nvidia’s chips were also denied. AMD was rumored to have a similar arrangement but did not comment.

[para. 7] On the digital asset front, IVD Medical Holding Ltd.’s stock surged 28% following the announcement of plans to purchase up to HK$880 million ($112 million) of ethereum as reserve assets. Its initial purchase involved 5,190 coins, emulating strategies of companies that acquire large amounts of crypto to increase their stock valuations and then buy more using associated capital raises.

[para. 8] On the global business scene, CK Hutchison Holdings Ltd. may add a Chinese mainland strategic investor, possibly China Cosco Shipping Corp., to a consortium bidding for its global port assets, aiming to ease regulatory hurdles. This move follows the expiration of exclusivity with a BlackRock-led consortium. The transaction, involving 43 port facilities in 23 countries, is not expected to close within 2025 due to its complexity and geopolitical sensitivities.

[para. 9] Regarding trade, U.S. President Donald Trump signed an executive order extending a 90-day tariff truce on certain Chinese goods, postponing higher tariffs until November 12. This action came after talks between U.S. and Chinese negotiators and just before the expiration of a previous extension.

[para. 10] In diplomatic developments, Russian President Vladimir Putin briefed Chinese President Xi Jinping about an upcoming meeting with President Trump regarding the Russia-Ukraine war, signaling China’s support for ongoing dialogue between Russia and the U.S. The scheduled meeting in Alaska would be the first face-to-face between sitting U.S. and Russian leaders since 2021 and the first between Trump and Putin in six years.

[para. 11] Lastly, on the healthcare front, Chinese regulators withheld full approval for Shanghai Green Valley’s Alzheimer’s drug GV-971. With its production and sales halted after 2.1 million boxes sold in 2024, the drug has attracted controversy over claims of academic misconduct in supporting research papers, leading to its regulatory setback.

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