The rare divergence of two key lending measures in July underscored unprecedented efforts to stabilize China's stock market turbulence, and the tepid level of credit support to the real economy, according to analysts.
The spectacular hike in new yuan loans announced by the People's Bank of China, the central bank, to both the real economy and non-bank financing institutions such as brokerages, took the market by surprise, coming in at 1.48 trillion yuan ($238 billion) for July, a 14.4 percent rise over a year earlier.
Another gauge of lending, total social financing, failed to mirror the new yuan lending.
That figure, which does not calculate lending to non-banking financing institutions, came in at 718.8 billion yuan, a plunge from 1.83 trillion yuan in June and much weaker than market expectations of around 1 trillion yuan.
Considering the different makeup of the two measures, the contrast was mainly caused by central government efforts to halt a stock market rout, analysts said, that sparked a surge in lending to financial institutions.
Total social financing figures revealed 589 billion yuan in loans were extended to the real economy.
The discrepancy between that and the 1.48 trillion of new loans, some 891 billion yuan, was the likely price paid for calming the equity market, they said. "This suggests that the banking sector may have extended around 1 trillion yuan in loans to China Securities Finance Co Ltd, for the rescue in July," said Nomura Securities Co Ltd in a research note.
The PBOC attempted to play down the figures, insisting the surge in new lending was the result of the central government's pro-growth measures which had lifted bank lending based on rising credit demands by the real economy.
It said the warming of the property market has also pushed mortgage supply to a record 1.4 trillion yuan during the first seven months, 280 billion yuan more than a year ago.
Local government debt restructuring, officials said, had improved the financing ability of banks, and reduced the level of distressed loans.
As new lending levels rose, so too did China's broader money supply by the end of July, increasing 13.3 percent over a year ago, a major jump on 11.8 percent rise in June, and the fastest pace this year.
Experts said, however, they expected the sluggish credit flow to the real economy to affect future growth.
Huang Wentao, an economist with China Securities, said he was concerned by the 589 billion yuan of monthly loans to the real economy.
"Corporate financing was particularly weak, with mid-to long-term corporate loans at their lowest level in 18 months. It is likely that new credit will fall in coming months," he said.
The weakness in real-economy lending, along with new data showing a deepening in factory-gate deflation and fall in exports, could explain the PBOC's move on Tuesday to lower its daily reference rate for the yuan by a record 1.9 percent, in an apparent bid to shore up exports, according to experts.
Li Miaoxian, an analyst with the Bank of Communications International Holdings Co, said: "The 'inflated' new yuan loans data suggests the real economy is not being given enough support. As downward pressure continues, currency depreciation is a necessary option."
