China Record Bank-Deposit Slump in July Erodes Lending Capacity

China’s local-currency bank deposits fell by a record in July, eroding lenders’ capacity to extend new credit just as the world’s second-biggest economy shows signs of faltering.

Yuan-denominated deposits fell by 1.98 trillion yuan ($321 billion) to 111.62 trillion yuan from the previous month, the central bank said today. That’s the biggest monthly decline in figures dating back to 2000.

A plunge in China’s broadest measure of new credit last month and new yuan lending that was less than half of the median analyst estimate underscored risks of a deeper economic slowdown as a property slump bites. Gross domestic product may expand 7.4 percent this year, the least since 1990, according to a Bloomberg News survey of economists.

Wealth-management products and other investment products lured about 1.6 trillion yuan of deposits, while customer funds parked with brokerage firms for stock investment increased by 300 billion yuan, according to the central bank.

Chinese banks’ stocks fell in Shanghai, led by Bank of Communications Co., which was down 1.4 percent as of the 11:30 a.m. trading break in Shanghai.