New bank loans in China rebounded in August in an indication that credit supply will be kept steady to support the world's second-biggest economy.
In a reverse of July's slump, banks in China extended an aggregate 1.36 trillion yuan of new domestic currency loans in August, a nearly threefold increase from the previous month's 346 billion yuan, according to data released by the People's Bank of China (PBOC) on Sept. 11. Measured over the previous year, new yuan loans rose 8.8%.
Total social financing, a broad measure of credit and liquidity in the economy, rose to 3.12 trillion yuan in August, compared with 528 billion in July. The year-over-year gain in total social financing, which includes off-balance sheet forms of financing such as initial public offerings, loans from trust companies and bond sales, was 26.3%, the data showed.
"Excluding single-month fluctuations, the July and August financing data still point to a smooth trend of credit supply," said Bruce Pang, chief economist and head of Greater China research at Jones Lang LaSalle. The August spurt in credit was stimulated by favorable government policies, Pang said, adding that financial institutions will "ensure that the total amount of credit is moderate and the rhythm is stable."
Weak housing
A weak housing market and declining exports have been concerns for the $17.963 trillion economy. Still, China expects gross domestic product to grow around 5.0% in 2023 as the central bank maintains an easing bias and the government loosened home buying restrictions to boost credit and spur household demand. Helped by pro-growth policies, China's consumer price index turned positive in August, signaling a recovery in domestic demand.
The corporate sector borrowed 949 billion yuan in August, compared with 238 billion yuan in July, while the household sector borrowed 392 billion yuan, compared with a contraction of 201 billion in July. The borrowings by households stayed sluggish, compared with 458 billion yuan in August 2022.
Loan demand from the household sector remained weak, particularly new medium- to long-term loans, which mostly comprise of mortgage loans, said Nomura in a Sep. 11 note, reflecting "still-poor demand from household for home purchases."
"It suggests that, even following the latest set of policy easing in the property sector, the effects either have yet to feed into the data or are having very limited positive impact on home sales," the Japanese brokerage said, and China may have to introduce more aggressive easing to ensure a real recovery.
