(Yicai Global) July 12 -- Even though new lending and social financing beat expectations last month, experts believe more fiscal and monetary policy support should be enhanced to counter China’s slowing recovery and boost confidence.

Effective demand is still not enough, Liu Lei, secretary-general of the National Institution for Finance and Development’s national balance sheet research center, wrote recently. China’s increasingly loose monetary policy works a little, but a proactive fiscal policy is urgently needed to increase its effectiveness, he said. 

Macro policies should focus on synergy so that monetary and fiscal policies can fully play their role, Ming Ming, chief economist of Citic Securities, told Yicai Global. The seven-day reverse repurchase rate remains at 1.9 percent and can still fall, he added, noting that the fiscal deficit-to-gross domestic product has stayed around 3 percent in recent years and can rise in the future.

The fiscal deficit should be increased to maintain moderate economic growth and boost employment, former Finance Minister Lou Jiwei wrote in a recent article for Economic Daily.

China’s newly-added social financing stood at CNY4.22 trillion (USD600 billion) in June, while new yuan loans rose by CNY3.05 trillion, according to data released yesterday by the People’s Bank of China. Economists polled by Yicai Global had predicted the figures to come in at CNY3.41 trillion and CNY2.37 trillion, respectively.

The financial data bottomed out in June, indicating that with the introduction of policies to support the recovery, market confidence and expectations have picked up, and credit demand has been restored, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance.

The PBOC’s interest rate cut mid-month stimulated investment and production demand and supported the growth of corporate lending thanks to credit impulse and continued policy guidance in favor of manufacturing and infrastructure, according to Wen Bin, chief economist at China Minsheng Bank.

In addition to that, the Dragon Boat Festival and mid-year shopping activities buoyed consumption, driving the improvement in households lending, Wen noted. Although the decline in real estate sales expanded in June, under the phased slowdown in early mortgage repayments, medium- and long-term household lending improved significantly from April and May, he added.

Editor: Futura Costaglione