(Yicai Global) June 22 -- China's consumer loans are expected to widen amid interest rate cuts and rebounding consumer spending, according to analysts.

China’s consumer demand is still recovering and manufacturers, retailers, and financial institutions have high expectations, while some lenders are likely to continue reducing their consumer loan rates, Economic Information Daily reported today, citing Zhou Maohua, macro researcher at Everbright Bank.

Individual short-term loans increased by CNY369.6 billion (USD55 billion) in May from April as the Covid-19 pandemic eased, residents’ consumption and business activities rebounded, and regulators requested financial institutions to support industrial players and business owners, said Wang Qing, chief macroeconomic analyst at Golden Credit.

This year, the People’s Bank of China has twice cut the loan prime rate, a benchmark that guides lenders' interest rates. On June 20, the LPR was 3.7 percent, down from 3.8 percent at the beginning of 2022.

The current consumer loan interest rate of major banks is around 4 percent, significantly lower than last year's average of 4.8 percent. Some banks have also introduced preferential policies. For example, China Merchants Bank announced that borrowers can enjoy a 22 percent discount from June 2 to June 16 so the annual interest rate is 3.95 percent at the lowest.

The trend has been shifting. Short-term loans to residents, including consumer and business loans, rose by CNY184 billion (USD27.4 billion) in May from April, according to data released by the PBOC. Consumer loans decreased by CNY104.4 billion in April.

Editor: Emmi Laine, Xiao Yi