PBoC: to guide banks to maintain reasonable growth in financing

PBoC: to guide banks to maintain reasonable growth in financing

The People's Bank of China (PBoC) has recently directed banks to maintain a reasonable pace of financing growth, aiming to stabilize the economy amidst ongoing challenges. This directive comes on the heels of a significant contraction in new yuan loans in July, which fell by 50 billion yuan ($6.97 billion), marking the first contraction since July 2005 and the largest monthly decline since December 1999 [1].

Analysts had forecasted new yuan loans to reach 300 billion yuan in July, but the actual figure fell well short of expectations, plunging from 2.24 trillion yuan in June. This contraction follows a period of strong credit expansion in June, where banks met their quarterly targets. The PBoC's guidance aims to balance credit growth with the need to manage risks and ensure financial stability [2].

July typically sees lower loan disbursements due to the post-peak period following strong credit expansion in June. However, the recent contraction is notable given the rebound in credit demand in June, which was boosted by improved trade sentiment and a tentative easing of trade tensions with the U.S. [3].

The PBoC's latest consumer loan subsidy program is expected to inject trillions of yuan into the economy, with analysts estimating up to 5 trillion yuan ($696 billion) in newly issued loans assuming a 50 billion yuan subsidy. This initiative aims to boost consumer spending and support the economy amidst ongoing trade disputes with the U.S. and a protracted real estate crisis [4].

While the consumer loan subsidy program is a bold move to stimulate domestic consumption, the PBoC has urged caution to prevent excessive borrowing. Lenders are advised to base decisions on borrowers' needs and credit status, ensuring responsible lending practices [4].

In summary, the PBoC's directive to maintain reasonable financing growth is part of a broader strategy to stabilize the economy while managing risks. The recent contraction in new yuan loans underscores the need for careful credit management, particularly in light of the consumer loan subsidy program and ongoing economic challenges.

References:
[1] https://www.reuters.com/markets/asia/china-july-bank-loans-unexpectedly-contract-first-time-20-years-2025-08-13/
[2] https://www.investing.com/news/economic-indicators/china-july-bank-loans-shrink-50-billion-yuan-well-below-forecasts-4187444
[3] https://www.ainvest.com/news/china-fresh-consumer-subsidy-program-boosting-trillions-loans-2508/
[4] https://www.bloomberg.com/news/articles/2025-08-13/china-s-new-loans-plunge-to-lowest-since-2007-as-demand-weakens