By Kevin Yao, Shi Bu and Liz Lee

BEIJING (Reuters) –

New bank lending in China rose less than expected in May after hitting a nine-month low in April. Companies and consumers remained cautious about taking on more debt, despite interest rate cuts and a trade truce between Beijing and Washington.

Chinese banks extended 620 billion yuan ($86.34 billion) in new loans in May, rising from 280 billion yuan in April—the lowest since July 2024, according to Reuters calculations based on data released by the People’s Bank of China on Friday.

Analysts expected May new yuan loans to reach 850 billion yuan, but it still lagged behind the 950 billion yuan seen a year earlier.

> “Bank loan growth continued to slow last month, but broad credit growth held steady, thanks to the continued strength of non-bank borrowing,” Capital Economics noted.

With deflation keeping real lending rates elevated, Capital Economics does not expect much of a pick-up in private credit demand over the coming months.

The central bank does not provide monthly breakdowns. However, new loan figures for May were calculated based on January-May data compared to January-April figures. Banks extended 10.68 trillion yuan in new loans in January-May, down from 11.14 trillion yuan in the same period last year.

Household loans, mostly mortgages, expanded 54 billion yuan in May compared to a contraction of 521.6 billion yuan in April. However, corporate loans fell to 530 billion yuan from 610 billion yuan in April.

The U.S. and China reached a framework trade deal at talks in London after a fragile truce struck in May faltered over China’s mineral export curbs. Analysts expect U.S. tariffs to remain higher than in past years, affecting Chinese exporters and causing a protracted property crisis which continues to sap loan demand and confidence.

Beijing’s monetary easing measures last month—such as rate cuts and liquidity injections—appeared to boost credit demand to some extent, although the full benefits may not have been realized yet. Analysts expect further policy rate cuts, estimating a reduction of 40 basis points later this year after last month’s 10 basis points cut.

Outstanding yuan loans rose 7.1% in May from a year earlier, a record low. In contrast, broader M2 money supply grew 7.9% year-on-year, below the forecast of 8.1%.

The narrower M1 money supply climbed 2.3% year-on-year. Total social financing (TSF), a broad measure of credit and liquidity in the economy, rose 8.7% year-on-year, unchanged from April. An acceleration of government bond issuance helped bolster TSF growth, which includes off-balance-sheet financing such as IPOs and loans from trust companies.