Bank loans gain popularity as regulators have limited the access to other credit sources in China

People's Bank of China figures show that Chinese banks granted 1.45 trillion in yuan denominated new lending in July (210 billion dollars). Growth in the stock of bank loans rose to 13.2 % y-o-y. For the first seven months of this year, the value of new bank lending reached 10.48 trillion yuan, an increase of 19 % from the same period in 2017.

In June and July, half of new bank loans went to companies and state organisations. Household borrowing accounted for about 40 % of new loans, down from well over 50 % a year ago. Financial institutions outside the banking sector have also increased their borrowing. For the first seven months of this year their stock of bank loans increased by 390 billion yuan, while in the same period last year it fell by 330 billion yuan.

Lending by small banks has grown faster than the lending of big banks. In the first half, small and mid-sized banks granted 25 % more new loans than in 1H17. The volume of new lending by large state-owned banks increased by 12 %. In the first half, large state-owned banks originated 39 % of all new loans, down from over half at the start of the decade.

The central bank has eased its monetary policy and officials are encouraging banks to increase their lending in response to a regulatory crack-down on shadow bank instruments. The PBoC reports that the average interest rate on bank loans has only risen modestly, standing at 6 % as of end-June.