(Yicai Global) Aug. 15 -- New yuan loans in China fell in July, the latest central bank figures show. The majority were household mortgages, suggesting that the nation's companies are becoming less willing to invest in the world's second-largest economy.
New yuan loans totaled CNY463.6 billion (USD69.8 billion) last month, down CNY1.01 trillion from a year earlier, the People's Bank of China said in a statement on Aug. 13. Banks issued household loans worth CNY457.5 billion. Medium- and long-term mortgages accounted for CNY477.3 billion, or a record 102 percent of total new loans. Short-term loans fell CNY19.7 billion.
Household loans include consumer loans and individual business loans, according to Mr. Zeng Gang, director of the Banking Research Division of the Chinese Academy of Social Science's Institute of Finance and Banking.
Individual long-term loans are now coming in at around CNY500 billion a month, with small fluctuations, but substantially higher than the CNY300 billion-plus level of previous years mainly because of increased buyers' leverage due to rising home prices, said Mr. Wang Jian, banking analyst at Guotai Junan Securities Co.
Though mid-to-long-term mortgages appear to account for more than the total new lending during the period, the amount was down CNY86.6 billion month-on-month, pointing to waning home purchases and a potential decline in future property investment, noted the fixed-income research team at CITIC Securities Co.
Medium- and long-term corporate loans were CNY151.4 billion in July, down CNY259.1 billion from the previous month, and short-term loans were CNY201.1 billion, down CNY399.2 billion.
State-owned enterprises, private companies, industries with excess capacity and some new energy sector firms are hoarding cash for investment, a number of banking insiders told Yicai Global.
"Deposits at some coal groups have increased by billions of yuan," a director of Taiyuan Iron & Steel Group's financial company told Yicai Global. Their cash piles are about CNY1 billion higher than previous years, he said.
He noted that coal miners have tens of billions of yuan of maturing debts due to frequent defaults. Businesses tend to accumulate funds to deal with repayment pressures. "Borrowing costs will spike once bond defaults or negative news occurs," he said.
Even the new energy sector has not been spared. A leading state-owned company in central China ramped up its investment in photovoltaic power and wind power plants last year without slowing its business expansion, Yicai Global has learned. However, spare funds collected by the company's financial arm have mostly been used to repay loans so far this year.
"Even if they make an investment, it is not an industrial investment but a financial one," Mr. Zong Liang, deputy head of Bank of China Ltd.'s Institute of International Finance, told Yicai Global. "In addition, such investments are usually short term."
The president of one joint-stock commercial bank's Jinan branch told Yicai Global that the branch has seen a relatively big increase in short-term loans, meaning businesses mainly borrow money for short-term capital turnover and general operating payments. However, medium- and long-term loans rose just CNY15.6 billion as of the end of June, pointing to a lack of confidence in investment and a lack of enthusiasm to invest in medium- and long-term industrial projects.
He also found that some firms would repay part of their debt to reduce financial expenses due to an absence or a lack of investment opportunities.