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Weak July China credit could raise pressure for PBoC easing
Commerzbank expects M2 growth to slip to 7.9% year over year and M1 to ease to 3.9% as markets watch for signs domestic demand is stabilizing.
Commerzbank analysts Charlie Lay and Dr. Henry Hao said the USD/CNY rate has been steady around 6.75, while their model points to a slightly stronger PBoC daily fixing.
They linked the near-term outlook to upcoming China data on July credit and money supply, noting that a weak print would reinforce subdued private borrowing and increase pressure on the PBoC to deliver more targeted easing. FXStreet said consensus expects M2 growth to ease to 7.9% year over year from 8.0% in June, with M1 forecast to fall to 3.9% from 4.0%.
FXStreet also highlighted additional benchmarks the analysts cited for the credit backdrop, including year-to-date aggregate financing rising to CNY21.9tn from CNY20.8tn in June, and new yuan loans outstanding edging down to CNY10.6tn from CNY10.7tn.
On the policy and fiscal side, FXStreet reported China has completed roughly 90% of its 2026 local government debt swap quota, with CNY1.8tn of hidden debt refinanced into official bonds. It also cited local governments reaching CNY2.5tn in new special bond issuance, around 58% of the CNY4.4tn full-year allowance, leaving room to accelerate in the second half, while the PBoC’s seven-day reverse repo rate remains the primary policy anchor.