China’s M2 money supply increased by 8.8% in July 2025 compared to last year, exceeding the expected 8.2%. However, new yuan loans fell by ¥50.0 billion instead of the forecasted rise of ¥300.0 billion, following a previous total of ¥2.24 trillion. This drop in loans is the first negative report since July 2005. Still, total new lending from January to July reached ¥12.87 trillion, which is lower than the anticipated ¥13.22 trillion. To combat this, Beijing plans to launch subsidies aimed at boosting domestic spending through larger loans.

Mixed Financial Trends

Overall, financial analysis shows mixed results: the S&P 500 and Nasdaq hit record highs, while the Nikkei surged due to positive expectations about a potential rate cut from the Fed. Plus500’s mobile revenue surged to 89%, well above the industry average of 55.5%. The article also highlights the risks of foreign exchange trading. It recommends that investors carefully assess their investment goals, risk tolerance, and experience before participating. Readers are advised to seek independent financial advice and be aware of the possible risks involved in investing. InvestingLive offers general market insights but cautions against relying solely on its information for investment decisions. As of August 13, 2025, perplexing data is emerging from China. The first negative figure for new bank loans since July 2005 raises concerns about economic demand, despite the M2 money supply growing faster than expected. This contradiction between the money in the system and the new credit being created poses a significant challenge for the market. Nevertheless, Beijing is promising substantial subsidies to create trillions in new lending, potentially reversing this negative trend quickly. This situation sets up a tense scenario between a possible economic slowdown and significant state-sponsored stimulus. The uncertainty makes options strategies, like straddles on China-linked ETFs such as FXI, particularly relevant in the upcoming weeks.

Commodity Market Reactions

Commodity markets are already responding to the anticipated slowdown in Chinese industry. Copper prices, a vital indicator of Chinese manufacturing health, have dropped to around $9,500 per ton on the London Metal Exchange this week. This decline suggests that traders are anticipating a slowdown, making put options on commodity producers a useful hedge for portfolios. This uncertainty in China contrasts sharply with the record highs in the S&P 500 and Nikkei, which are buoyed by hopes for a Fed rate cut in September. We recall the market turbulence of late 2015 when fears of a hard landing in China sent shockwaves through global equities. Although the Cboe VIX index remains historically low, there has been an increase in call option buying, indicating that some traders are starting to buy insurance against potential downturns. In the currency market, the Australian dollar is under significant pressure, as its value is closely linked to China’s economic health and demand for raw materials. The AUD/USD pair has recently dipped below the 0.6500 mark, a key psychological support level this year. Traders might consider selling rallies in the Aussie dollar or buying put options as a direct response to this situation. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now