Â
>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<
Â
Â
China’s credit growth picked up in August from a record low in the previous month after the central bank cut benchmark lending rates and pushed banks to lend more, though lending to households remained sluggish amid persistent weakness in the housing market.
Chinese banks extended 1.25 trillion yuan of new yuan loans in August, according to data released by the People’s Bank of China (PBOC) on Friday, compared to 679 billion yuan in the previous month and 1.48 trillion yuan expected by analysts in a Reuters survey.
In breakdown, loans to the household sector increased by 458 billion yuan in August, compared to 121.7 billion yuan in July, and that included 192.2 billion yuan of short-term loans and 265.8 billion yuan of medium- and long-term loans, most of which are home mortgages. showed the data.
Loans to the corporate sector increased by 875 billion yuan, compared to 287.7 billion yuan in July, and on that, short-term loans falling by 12.1 billion yuan, medium- and long-term loan rising by 735.3 billion yuan and bill financing rising by 159.1 billion yuan.
Outstanding yuan loans at the end of August were up 10.9% from a year earlier, compared with the 11% growth the previous month. Analysts had expected 11% growth.
China’s M2 money supply grew by 12.2% in August from a year earlier, according to the data, compared to 12% growth in the previous month and expected 12.1% gain.
China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, reached 2.43 trillion yuan in August, showed the data, compared to 756.1 billion yuan in the previous month and expected 2.075 trillion yuan.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.5% in August from 10.7% in July.
Analysts say demand for credit is still weak as business and consumer confidence remain fragile.
“August lending data was driven by stronger medium- and long- term corporate loans, while household loans remain relatively weak,” said Luo Yunfeng, an analyst at Merchants Securities.
The property sector, hard hit by a debt crisis, has been hammered by a mortgage boycott as homebuyers withhold payments for stalled projects. New home sales and construction have tumbled.
Policymakers signalled a renewed sense of urgency on Monday for steps to shore up the flagging economy, saying this quarter was a critical time for policy action as evidence points to a further loss of momentum.
On Aug. 22, the central bank cut the one-year loan prime rate (LPR), its benchmark lending rate, by 5 basis points, and lowered the five-year LPR, which influences mortgages, by a bigger margin.
The consumer price index (CPI) increased 2.5% in Aug. from the same month a year earlier, National Bureau of Statistics (NBS) data showed. Analysts said slowing inflation could give some room for further monetary policy easing.
“In the near term, any sizeable acceleration in credit growth looks increasingly unlikely,” Capital Economics said in a note.
“The PBOC cut a little off its main policy rates in August. And quantitative controls have continued to be loosened. But the People’s Bank (of China) is pushing on a string. Demand is the problem.”