China Stocks Plummet Amid Lowest Lending Levels in 15 Years

Chinese stocks fell to their lowest levels in six months, driven by a substantial drop in new yuan loans in July. The lending decline has surpassed analyst expectations, highlighting the fragile investor sentiment. The central bank may introduce more easing measures to counter the drop in credit demand.

In a significant market shift, Chinese stocks plummeted to their lowest levels in six months, driven by data revealing a substantial tumble in new yuan loans. According to the People's Bank of China, banks extended 260 billion yuan ($36.28 billion) in new loans in July, an 88% decline from June and an indicator of tepid credit demand.

The CSI 300 Index closed 0.8% lower, and the Shanghai Composite Index dropped by 0.6%. This trend contrasted with other Asian markets, which showed positive movement. As a result, investor sentiment appeared fragile, raising concerns over economic stability and potential central bank interventions.

Goldman Sachs analysts noted the prospect of a 25-basis-point cut to the reserve requirement ratio in Q3 and a 10-basis-point policy rate cut in Q4 to mitigate the impact on the economy. Meanwhile, various sectors including consumer staples and real estate lagged, exacerbating the market's decline.

(With inputs from agencies.)