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Credit slowed further in June, expecting faster fiscal stimulus (Morgan Stanley)

2026-07-17·ima-daily5min-0717-06-da339870a9

Street Signal | Credit slowed further in June, expecting faster fiscal stimulus (Morgan Stanley)

A Morgan Stanley report showed that China's broad credit growth slowed to 7.5% year-on-year in June. The weakening credit reflected weak domestic investment, consumption and housing sales. At the same time, public financing showed initial signs of acceleration, and the net issuance of government bonds exceeded the same period last year.

This means that the private sector's credit creation capacity is insufficient, but the government sector is taking over. GDP in the second quarter was lower than the target, which heightened the urgency of policy fine-tuning. The market has expected a credit slowdown, but is divided on the pace of fiscal acceleration.

The core logic behind it is that whether the economy can be stable in the second half of the year depends on the intensity of fiscal hedging. Accelerating public financing is expected to boost overall credit growth by 40-50 basis points in the second half of the year.

One-sentence conclusion: June credit data confirms that the endogenous power of the economy is insufficient, and fiscal policy must be more active to offset the contraction of private sector credit. This is the key to whether the economy can stabilize in the second half of the year.

Positive/negative: Positive for the infrastructure sector and government-related bonds; negative for cyclical industries based on credit expansion. At present, the market has expectations for policy increases, but the specific scale and effect of Price In's financial efforts have not yet been fully determined. Catalysts:

1) Statements on finance and infrastructure at the Politburo meeting in July;

2) The issuance pace of government bonds, especially special bonds, in the second half of the year.

Full text

Credit slowed further in June, expecting faster fiscal stimulus (Morgan Stanley)

A Morgan Stanley report showed that China's broad credit growth slowed to 7.5% year-on-year in June.

A Morgan Stanley report showed that China's broad credit growth slowed to 7.5% year-on-year in June. The weakening credit reflected weak domestic investment, consumption and housing sales. At the same time, public financing showed initial signs of acceleration, and the net issuance of government bonds exceeded the same period last year. This means that the private sector's credit creation capacity is insufficient, but the government sector is taking over. GDP in the second quarter was lower than the target, which heightened the urgency of policy fine-tuning. The market has expected a credit slowdown, but is divided on the pace of fiscal acceleration. The core logic behind it is that whether the economy can be stable in the second half of the year depends on the intensity of fiscal hedging. Accelerating public financing is expected to boost overall credit growth by 40-50 basis points in the second half of the year. One-sentence conclusion: June credit data confirms that the endogenous power of the economy is insufficient, and fiscal policy must be more active to offset the contraction of private sector credit. This is the key to whether the economy can stabilize in the second half of the year. Positive/negative: Positive for the infrastructure sector and government-related bonds; negative for cyclical industries based on credit expansion. At present, the market has expectations for policy increases, but the specific scale and effect of Price In's financial efforts have not yet been fully determined. Catalysts: 1) Statements on finance and infrastructure at the Politburo meeting in July; 2) The issuance pace of government bonds, especially special bonds, in the second half of the year.

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