Underlying demand remains split. Strategic industries, state-linked borrowers and some exporters continue to absorb substantial credit, while households and domestically exposed private firms stay cautious. Property loans fell 4.9% year-on-year in the second quarter, with developer loans down 8.5% and individual mortgages down 3.8%. Household loan balances overall declined 1.3%, though operating loans to households rose 2.8%. Meanwhile, green loans grew 14.5% and loans to technology-focused small enterprises jumped 20.1%, reflecting policy-directed credit allocation.
The demand weakness shows up in activity gauges. The official manufacturing PMI slipped to 49.2 in July from 50.3 in June, the first sub-50 reading since February. The non-manufacturing index fell to 49.0 and the composite to 49.3. High-technology and equipment manufacturing stayed in expansion, but consumer-goods production, energy-intensive industries and smaller firms contracted. Fixed-asset investment excluding rural households fell 5.7% in the first half, with real-estate development investment down 18% and private investment down 8.5%.
Monetary policy has held the one-year and five-year loan prime rates at 3% and 3.5% for a 14th consecutive month. The PBOC's second-quarter monetary policy report shifted language toward "diversified loan pricing benchmarks" and greater focus on overnight rates, while retaining a "moderately loose" stance and a pledge of ample liquidity. A targeted 760 billion yuan push into private-sector lending was announced in July, but broad stimulus has been ruled out for the second half.