China's central bank calls on banks to increase lending

People’s Bank of China (PBoC) officials have asked banks to increase lending. Chinese banks issued the lowest monthly loan amount since 2009 in July. The central bank and financial regulators met with bank executives and told them to increase lending to support the recovery, reflecting growing signs that policymakers are growing concerned about the worsening economic outlook. Officials from China Life Insurance Co. and stock exchanges were at the same meeting on Friday, the central bank said on Sunday. The meeting discussed measures to prevent and reduce financial sector and local government debt risks. The central bank unexpectedly cut interest rates last week to support the economy against risks from the country’s worsening housing crisis and weak consumer spending. The cut was the largest since 2020. The surprise move by the central bank came shortly before the release of economic activity data for July, which showed overall slowdowns in growth in consumer spending, industrial production and investment, while unemployment rose. The statement noted that financial institutions, especially large state-owned banks, should increase the amount of credit they provide and avoid large fluctuations in lending. Chinese banks issued the lowest monthly amount of credit since 2009 in July. This was interpreted as another sign of weak demand, which increases the risk of prolonged deflationary pressure in the economy. The central bank, regulators and financial institutions should coordinate to reduce risks associated with local government debt, it said.