China's Financing Growth Hits Record Low in First 5 Months; Mortgage Lending Plummets

(CNA, Taipei, June 12) The People's Bank of China (PBOC) today released its financial statistics report for May. In the first five months of this year, the increment in aggregate social financing was 458.81 trillion yuan (approximately 2142 trillion NT dollars), a 7.7% year-on-year increase, marking the slowest growth rate on record. 'Medium- and long-term household loans,' which represent mortgages, increased by only 62.8 billion yuan, a massive decrease of 771.9 billion yuan compared to the same period last year.

The report shows that in the first five months of this year, China's aggregate social financing increased by a cumulative 17.48 trillion yuan, a decrease of 1.16 trillion yuan from the same period last year. Among this, loans to the real economy increased by 9 trillion yuan, down by 1.38 trillion yuan. New loans in May amounted to 501.0 billion yuan, also down by 91.3 billion yuan.

China continues to experience weak consumption and sluggish domestic demand. Although bank deposit rates have fallen to the 1-percent range, citizens and enterprises are still increasing their savings and repaying loans rather than investing.

The report indicates that in the first five months, RMB deposits increased by 15.77 trillion yuan, a surge of over 5 trillion yuan from the 10.68 trillion yuan in the same period last year. Among this, household deposits increased by 5.63 trillion yuan, non-financial enterprise deposits by 1.26 trillion yuan, fiscal deposits by 1.91 trillion yuan, and deposits from non-banking financial institutions by 5.64 trillion yuan.

Meanwhile, after a record-breaking net repayment of household loans in April, households continued to make net repayments of 141.2 billion yuan in May, with 84.0 billion yuan in short-term repayments and 57.1 billion yuan in medium- and long-term repayments.

The report shows that in the first five months, household loans saw a net decrease of 631.4 billion yuan, with short-term loans decreasing by 694.2 billion yuan, indicating a lack of consumer confidence and low credit demand. Medium- and long-term loans (mortgages) increased by only 62.8 billion yuan, compared to an increase of 834.7 billion yuan in the same period last year.

An analysis by mainland media outlet China Financial Net stated that these figures together paint a picture of 'exquisite conservatism': residents are desperately saving, enterprises are afraid to borrow, and houses have become slow-moving goods.

The analysis said that the PBOC's lending tap has been turned to the maximum, but the water is just not flowing into the real economy. In the second half of the year, policies might need to introduce stronger medicine—interest rate cuts, reserve requirement ratio cuts, easing of home purchase restrictions, increased fiscal spending, or even direct cash handouts to residents.

According to the report released by the PBOC today, as of the end of May, China's broad money supply (M2) balance was 353.67 trillion yuan, an 8.6% year-on-year increase. The narrow money supply (M1) balance was 114.89 trillion yuan, up 5.5% year-on-year. Currency in circulation (M0) balance was 14.69 trillion yuan, up 11.9% year-on-year. (Editing: Yang Sheng-ju / Chen Hui-ping) 1150612