China's lending growth rate is reportedly "poor," a scenario that has alarmed some economists.

Based on the report released by the People's Bank of China, total social financing as of July hit 487.9 billion yuan ($73.4 billion), which is lower than the set market expectations.

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Social financing, or non-government borrowing, as explained by China Daily, is the "broadest measure" of the country's credit and liquidity.

The report further revealed that divergence in the other gauges of money supply - the narrow measure of money supply (M1) and broad measure (M2) - has also widened.

Amid this scenario of China's lending growth, it is reportedly feared that the country will fall into the "liquidity trap."

As of July this year, the M1, which includes cash and demand deposits, posted an increase of 25.4 percent compared to the same period last year, while the M2, which consists of cash and all types of deposits, was up by 10.2 percent.

Ying Xiwen, an economist at China Minsheng Securities Co, explained that the increase in M1, which is affecting China's lending growth, can be attributed to the enterprises' decision to deposit their money in banks instead of spending it on feasible investments.

"The government has to find solutions to lower the M1 growth, as business confidence remains in the doldrums," Ying said.

Ying also noted that although it is still too early to conclude that the country is heading towards the so-called liquidity trap, "the divergence is sounding an alarm bell."

Meanwhile, Su Jian, an economics professor at Peking University, has alleged that with the absence of enough incentives from the People's Bank of China, the central bank, to "relax" the country's monetary policy, "The authorities may get less determined in pushing reform if they find it is difficult to achieve a growth target of at least 6.5 percent (for this year).

Considering the current lending growth in China, Su stated as well that "It would be better to stick to the reform agenda, (because) the corporate sector would be less likely to hold onto cash if uncertainties are reduced."

Tagschina, China Lending Growth