(Yicai Global) Aug. 15 -- China’s weaker-than-expected financing demand in July was caused by seasonal factors so economic recovery could still improve in the second half, according to analysts.

An important focus for China's monetary policy in the second half will be alleviating the insufficient loan demand under the premise of not issuing excessive currency to maintain market liquidity, analysts predicted recently.

China’s new yuan-denominated loans totaled CNY679 billion (USD100 billion) last month, or CNY404.2 billion lower than a year ago, the People’s Bank of China announced recently. The addition of social financing, an indicator of financing to the real economy, was CNY756.1 billion, down by CNY319.1 billion.

The worse-than-expected data reflect sluggish financing needs of the real economy as such support has not reduced this year, analysts said.

The sharp decline in July is related to a bump in June to achieve a certain target for the second quarter, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating. Social financing slumped from June but also from a year ago so that shows the loose credit policy encountered setbacks, Wang added.

There was a seasonal increase in credit in June but after that financing demand softened as banks were upgrading their performance requirements, said Yin Yue, macroeconomic analyst at Hongta Securities.

Meanwhile, macroeconomic recovery was moderate, Wang said. The property market cooled again in July, which also had a certain impact on medium and long-term loans of residents and enterprises, the chief analyst added.

In July, corporations were opting for short-term loans as new demand for medium and long-term funding reduced and this shows that enterprises have bearish expectations for the future, said Liang Si, researcher at the Bank of China Research Institute.

However, things are not that bad as the pace of narrowing is at a reasonable range, said Wang Yunjin, senior researcher at Zhixin Investment Research Institute. This does not mean poor demand or a failure of a series of policies to stabilize growth, he added.

In the first seven months of this year, China's new yuan loans tallied CNY14.3 trillion (USD2.1 trillion), up CNY524.4 billion from a year ago. The scale of added social financing was CNY21.8 trillion, up CNY2.88 trillion (USD425.7 billion). The figures are predicted to maintain a steady growth this year with supportive policies.

Editor: Emmi Laine, Xiao Yi