New yuan-denominated lending in July fell to 532.8 billion (78.6 billion U.S. dollars) from 603.4 billion yuan in June, the People's Bank of China (PBOC), the central bank, said in a statement Wednesday.

The July figure brought new loans for the first seven months to more than 5.16 trillion yuan, compared with 7.73 trillion yuan during the same period last year.

The decline followed the central bank's controls over lending to local financial vehicles, the property sector and industries with overcapacity.

Total outstanding yuan-denominated loans stood at 45.14 trillion yuan at the end of July, up 18.4 percent year on year, said the statement on the PBOC website.

China's broad money supply (M2), which covers cash in circulation and all deposits, increased 17.6 percent year on year to 67.41 trillion yuan by the end of July. It marked a slowdown from the 18.5 percent increase at the end of June, according to the statement.

Narrow money supply (M1), cash in circulation plus current corporate deposits, climbed 22.9 percent from a year earlier to 24.07 trillion yuan, representing a decrease of 1.7 percentage points from the end of June.

Chinese government fixed this year's target for new loans at 7.5 trillion yuan, after the record 9.59 trillion yuan of new loans in 2009 fueled fears of asset bubbles.

Loans data for July was still within normal territory despite a drop from June, said Chen Xingdong, chief economist with BNP Paribas Asia Ltd.

Combined new loans in the first half accounted for 61 percent of the year's target, leaving 39 percent for the second half, which meant a looser environment for lending compared with the same period last year, he said.

Chinese banks extended about 2.22 trillion yuan of new loans in the second half of last year, compared with about 2.87 trillion yuan of new loans accessible in the second half of this year.

The central bank said Aug. 5 that it would maintain its moderately loose monetary policy and enhance financial supports to boost the economy's sustainable development, while, at the same time, making the policy more specific and flexible.

"The policy stance in the coming months could be best summarized: 'loose fiscal, tight monetary'," Lu Ting, China economist for Bank of America Merrill Lynch, in a client e-mail note.

China would ramp up government spending on public housing and other public works, but it would stick to its loan target, its structural reforms and its property tightening measures this year, Lu added.