Chinese bank lending exploded last month, and more than $US100 billion probably ended up in stocks

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Chinese new bank lending in July expanded at the fastest pace seen since June 2009.

At 1.48 trillion yuan, or around $US238 billion, the figure roughly doubled estimates for an increase of 738 billion yuan. It also tripled the 385 billion yuan figure recorded in July 2014.

This was the fourth-largest monthly increase on record.

Some of the details in the data gives us some indication of how much money was borrowed while Beijing was scrambling to prop up the stock market last month.

The People’s Bank Of China noted new lending to non-bank financial institutions increased by a whopping 886.4 billion yuan ($US142.75 billion over the month).

Non-bank financial institutions include brokers, insurance companies, and investment funds. These were the types of funds that Beijing turned to as the executors of its determination to put a floor under stock prices.

It’s a safe bet that most of this money borrowed by non-bank institutions ended up in stocks.

From a year earlier, outstanding bank loans increased by 15.5%, up from 13.4% in June. The acceleration was the fastest seen since November 2012.

Along with the increase in bank lending, broad money – M2 – also accelerated, rising by 13.3% year on year. The figure was well ahead of the 11.8% annual increase of June and expectations for a deceleration to 11.7%.

Despite the acceleration in bank lending and M2, total social financing – the broadest measure of liquidity that captures lending from non-traditional sources – fell to 718.8 billion yuan from 1.86 trillion yuan in June.

Although a sharp drop, it’s not that uncommon. In July 2014, total social financing fell to 273.1 billion yuan from 1.97 trillion yuan in June.

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