The central bank has pledged to keep policy slightly loose to meet growth targets, but mounting local government debt has caused concerns.
Chinese banks extended 463.6 billion yuan ($69.78 billion) in new yuan loans in July, missing analyst forecasts and falling significantly from the previous month, amid wide debate over whether the central bank should cut interest rates this year.
The central bank has pledged to keep policy slightly loose to meet growth targets, but mounting local government debt has caused concerns about the effectiveness of further stimulus.
Economists polled by Reuters had expected new loans to be 800 billion yuan in July, after 1.38 trillion yuan in June.
Total social financing (TSF), a broad measure of credit and liquidity in the economy, fell to 487.9 billion yuan in July from 1.63 trillion yuan in June. TSF importantly includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offers, loans from trust companies and bond sales.
China's growth outlook remained weak as global and domestic demand continued to soften. However, a moderation in producer price deflation and well-contained consumer inflation in July have led many analysts to believe the central bank has little incentive to cut interest rates again.
Broad M2 money supply (M2) grew 10.2 percent from a year earlier, compared with June's 11.8 percent gain. Analysts had expected July's growth to be 11.2 percent.
Outstanding yuan loans grew 12.9 percent by month-end on an annual basis, versus expectations of 13.8 percent.
The PBOC is aiming for annual M2 growth of around 13 percent this year, pointing to continued accommodative policy as Beijing pledges to embark on painful economic restructuring involving state owned enterprises in key industrial sectors.