China’s August new bank loans lower than expected, credit growth slows

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BEIJING: New bank lending in China rose less than expected in August, while broader credit growth slowed, despite central bank efforts to boost demand, as the COVID surge and worsening the asset crisis weigh on the economy.

Banks extended 1.25 trillion yuan ($180.63 billion) in new yuan loans in August, up from July but below analysts’ expectations, according to data released Friday by the People’s Bank of China ( PBOC).

Analysts polled by Reuters predicted new yuan lending would rise to 1.48 trillion yuan in August, double 679 billion yuan in the previous month and 1.22 trillion yuan in the same month last year.

Home loans, including mortgages, reached 458 billion yuan from 121.7 billion yuan in July, while corporate debt rose to 875 billion yuan from 287.7 billion yuan in July, according to central bank data.

But analysts say demand for credit is still weak as business and consumer confidence remains weak.

Nomura estimates that 49 cities were under some form of COVID lockdown as of Sept. 6, representing about 21% of China’s population and about 25% of its GDP.

The real estate sector, hit hard by a credit crunch, was hammered by a mortgage boycott as homebuyers halted payments for stalled projects. Sales and construction of new homes declined.

Policymakers on Monday signaled a renewed urgency for measures to shore up the sagging economy, saying this quarter was a critical time for policy action as evidence points to a further loss of momentum.

On August 22, the central bank cut the one-year prime rate (LPR), its benchmark lending rate, by 5 basis points, and lowered the five-year LPR, which affects mortgages, d a wide margin.

Data from the National Bureau of Statistics (NBS) shows that the consumer price index (CPI) rose 2.5% in August compared to the same month a year ago. Analysts said moderating inflation could pave the way for further easing of monetary policy.

M2 broad money supply rose 12.2% from a year earlier, above a Reuters poll estimate of 12.1%, central bank data showed. M2 increased by 12% in July compared to the previous year.

Outstanding yuan loans at the end of August were up 10.9 percent from a year earlier, compared with an 11 percent increase the previous month. Analysts had expected growth of 11%.

As part of the economy support measures, local governments will issue 500 billion yuan of deferred special bonds to fund infrastructure projects by the end of October.

Any acceleration in government bond issuance could help boost total social financing (TSF), a broader measure of debt and liquidity.

Growth in the total stock of social finance (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.5% in August from 10.7% in July.

The TSF includes forms of off-balance sheet financing that exist outside of the traditional bank lending system, such as initial public offerings, trust company loans, and bond sales.

In August, the TSF rose to 2.430 billion yuan from 756.1 billion yuan in July. Analysts polled by Reuters had expected 2.075 billion yuan.

($1 = 6.9176 Chinese Yuan Renminbi)

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