New bank lending in China plunged surprisingly in July to the lowest in nearly five years after an exceptionally strong growth in June. Banks in China extended CNY385.2 billion in new yuan loans in July, only a third of the amount in June and CNY314.5 billion less than in July last year, the People’s Bank of China (PBOC) said in a statement. Total social financing fell to a six-year low of CNY273.1 billion, one seventh of that in June and a third of that a year earlier. The outlook is positive as banks were lending between CNY30 billion and CNY50 billion per day in the first half of August, the PBOC said, at which pace August lending could again top CNY1 trillion. The PBOC said banks now are more cautious in extending loans and avoiding risky sectors after the bad loan ratio rose for 11 consecutive quarters. Economists are worried that risk aversion among financial institutions may further pressure the economy. “Beside seasonal volatility, we think the negative surprise in the loan data reflects the downside risks to growth, such as overcapacity and the housing downturn,” HSBC said.