CNY bearish: China’s confidence plummets as outstanding loans hit record low

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on Jun 14, 2024
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  • China's outstanding loans dropped from a 9.6% rise in April 2024 to 9.3% in May.
  • 9.3% is the lowest figure ever recorded for the country’s monthly outstanding loans data.
  • Also out today, China's new yuan loans amounted to 950 billion yuan, less than half the 2250 billion expected.

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Today, the People’s Bank of China (PBoC) revealed the country’s latest figures for both new and outstanding loans data for May 2024.

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Outstanding loan growth hits new record low

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Out earlier today were PBoC’s outstanding loan growth figures for May 2024. Outstanding loans increased 9.3% last month, compared with May 2023.

However, month-over-month, outstanding loans dropped from a 9.6% rise in April 2024 to 9.3% in May, according to today’s data.

The reading of 9.3% is the lowest figure ever recorded for the country’s monthly outstanding loans data.

What does the outstanding loans data mean?

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The PBoC’s tally of outstanding loans measures by how much (or how little) banks loans have grown, which are still outstanding.

The bank loans in question are those issued to Chinese consumers and businesses.

Although you may think that a decreasing figure is a good sign for an economy, it’s actually the opposite. Rising outstanding loans are associated with increased spending and borrowing, which can often be a leading indicator of consumer and business confidence in the economy.

Therefore, higher-than-anticipated outstanding bank loans figures generally can indicate bullishness for the CNY in future, while lower-than-expected ones are often a bearish signal for the CNY.

New yuan loans data

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According to the PBOC, the nation’s new yuan loans amounted to 950 billion yuan (approximately $131 billion in US dollars) for the month of May.

This was significantly below analysts’ expectations, who broadly anticipated around 2250 billion yuan – over $1 billion more in US dollars – for last month.

This comes after April’s new loans data for China was its own disappointing figures at 800 billion yuan – a steep drop from the 3 trillion yuan in March.

What does the new loans data mean?

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New yuan loans data measures how much money, in yuan, consumers and businesses are taking out from Chinese banks in the form of loans.

A high (or higher-than-expected) amount is a sign of increased consumer and business confidence in the Chinese economy.

In this way, it can be a leading indicator for bullishness in the CNY.

Meanwhile a low or lower-than-expected reading is often a sign of dropping confidence in China’s consumers and businesses, as well as a bearish indicator for the CNY.

The fact that May’s new yuan loans data shows amounts of 1300 yuan less than expected – more than half of the 2250 total – certainly has negative implications for the CNY, and adds fuel to the outstanding loans’ data fire.

China CNY Economic Forex