(Yicai Global) Aug. 12 -- China released its July economic data yesterday. Analysts cited slowing external demand, stricter mortgage rules, the not-so-loose fiscal policy, the Covid-19 pandemic and extreme weather for the lower-than-expected numbers.

The figures indicated insufficient credit demand, they said, suggesting that there is room to ease fiscal policy further.

Social financing, a broad gauge of credit and liquidity in the economy, rose by CNY1.06 trillion (USD163.7 billion) last month, well below the CNY3.67 trillion seen last month, data from the People’s Bank of China showed.

Broad money supply, M2, gained 8.3 percent from a year earlier and down 0.3 percentage point from June. Yuan-nominated loans stood at CNY1.08 trillion, much below June’s increase of CNY2.12 trillion.

All three figures were below the average forecast by chief economics surveyed by Yicai Global. They expected social financing to have risen CNY1.75 trillion, an M2 increase of 8.75 percent and a CNY1.17 trillion gain in yuan loans.

Wen Bin, chief researcher at China Minsheng Bank, cited two reasons for the weaker-than-expected social financing data. First, under risk-prevention policies, bank loans and off-balance-sheet financing have fallen. Second, government bond sales have been significantly slower than in past years.

Net financing of government bonds was CNY182 billion (USD28.1 billion) in July, down CNY363.9 billion from a year earlier, indicating there is still no clear sign of fiscal efforts.

Real estate regulatory policy is also a key reason behind the decline in new yuan loans, according to Wang Hao, a senior researcher at Zhixin Investment Research Institute. Mid- and long-term household loans, which measure growth of residential real estate loans, declined amid recently tightened real estate regulation.

Mid-and long-term household loans tallied CNY397.4 billion in July, down from CNY515.6 billion in June, PBOC data showed.

Slowing external demand, the Covid-19 pandemic resurgence and extreme weather significantly tempered economic activity, slowing gains in yuan loans and M2, analysts said.

In the second half, monetary policy tools will be limited by various factors, including overseas inflation, changes in the US Federal Reserve’s monetary policy and domestic inflationary pressure, the said, adding that this will leave room for fiscal policy to come into play.

Moderate adjustments in China’s fiscal policy are possible this half, Zhou Maohua, an analyst at China Everbright Bank’s financial market division, said. The economic recovery will remain stable overall without sharp ups and downs, he added.

Editors: Xu Wei, Peter Thomas