Chinese credit growth slows sharply in July

Chinese credit growth slowed sharply in May as the impact of earlier monetary easing by the country´s central bank waned, some economists said.

So-called total social financing, the broadest measure of lending in the economy, increased by 488bn yuan, down from 1,630bn yuan in the month before.

On average, economists had forecast a rise of 1.0bn yuan in June.

Local currency loans from the country´s banks shrank to 464bn yuan from 1,380bn yuan. That saw the rate of expansion in outstanding bank loans fall from a 14.3% year-on-year pace to 12.9%.

Nevertheless, rapid government borrowing helped to offset the decline, with the stock of government debt rising by more than 60% year-on-year in July, Julian Evans-Pritchard, China economist at Capital Economics said in a research note sent to clients.

A measure of TSF adjusted for government bond issuance slowed from a rate of growth of 16.8% year-on-year to 16.3% , the think-tank estimated.

"Stepping back, broad credit is still expanding at a faster pace than during most of the past couple of years, which should provide further support to economic activity for a while longer. But with the People’s Bank having refrained from further action in recent months, the impact of earlier monetary easing now appears to be waning with credit growth falling back as a result," Evans-Pritchard said.