China's bank lending slowed more than expected in July to seven-month lows after Beijing kept a tight grip on monetary policy to quell near three-year-high inflation.

But as growth slows in China's top two export markets, the United States and Europe, some analysts think Beijing may loosen credit conditions slightly in coming months by tempering interbank market rates, and telling banks to lend to smaller firms.

Data showed banks lent 492.6 billion yuan loans in July, missing forecasts for 550 billion yuan worth of lending, and compared to June's loan issuance of 634 billion yuan.

"The July new loan is too low to be sustainable," said Xu Biao, an economist with China Merchants Bank in Shenzhen. "Without doubt, some kind of bank credit easing will take place in coming months."

M2 money supply was shown to have grown 14.7 per cent, again under forecasts for a 15.8 per cent rise. Yuan loans outstanding at the end of July were 16.6 per cent higher than a year earlier.

Bank lending is a focal point in China's monetary policy as it is controlled by Beijing through loan quotas to manage economic growth and control inflation.

Rattled by swings in financial markets and a darkening outlook for the world economy, Beijing has signalled it is ready to refrain from further tightening policy, having raised rates five times in the past 10 months.

Data earlier this week showed China's exports in July surged to record highs after US and European shipments proved surprisingly buoyant. The brisk economic activity kept inflation elevated at three-year highs of 6.5 per cent in July.

While China's monthly publication of bank lending data is a barometer for the amount of lending that is happening, it does not paint a comprehensive picture.

Instead, a rising portion of lending and fund raising activities are happening outside Chinese regulator's purview, through off-balance-sheet bank lending and informal loans offered by cash-rich people.

Reuters