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China's total yuan loan balance reached 227.53 trillion yuan ($31.8 trillion) in May, marking an 11.4 percent year-on-year increase, according to the People's Bank of China (PBC) on Tuesday. New yuan loans totaled 1.36 trillion yuan, which is 541.8 billion yuan less than May 2022.

Experts suggest that the decline in new yuan loans may be influenced by the sluggish real estate market, creating more space for the effectiveness of supportive policies.

Data from the National Bureau of Statistics (NBS) shows a 6.2 percent year-on-year decline in China's real estate investment during the first four months of 2023.

Tian Yun, a veteran economist, told the Global Times that adjustments to commodity purchasing limits, including housing and automobiles, would help stimulate the market.

The PBC reduced its seven-day reverse repo rate by 10 basis points to 1.90 percent on Tuesday, injecting 2 billion yuan for the first time in 10 months. Analysts believe that this reduction will be followed by similar cuts to the MLF rate on Thursday and the LPR next Tuesday, which will directly impact the real estate and loan market.

Given the ongoing risks in the global economy, the international market is anticipating a potential improvement in the relationship between China and the US, the two largest economies in the world, in the latter half of 2023, according to Tian.

He added, "The stabilization of the external market will instill confidence in Chinese domestic investors and boost overall financing and loan scale." He also said that a series of supportive policies will become effective, driving China's economic growth for the remainder of the year.

Global Times