China's banks extended just 60 billion yuan ($8.95 billion) in new loans in August, far below the 400 billion yuan analysts had forecast. Outstanding loan growth also slowed to its weakest pace on record, underscoring how little the household and corporate sectors are borrowing even as Beijing pumps money into the financial system.
Loan growth misses forecasts
Chinese banks extended 60 billion yuan ($8.95 billion) in new loans in August, bouncing back from a 340 billion yuan contraction in July. But analysts polled by Reuters had expected new yuan loans to rebound to 400 billion yuan, still well off the 590 billion yuan extended a year earlier. New loans totaled 10.44 trillion yuan in the January-August period, down from 13.46 trillion yuan in the same stretch last year.
Outstanding yuan loans grew 4.9% from a year earlier in August, slowing from 5.1% in July to the weakest pace on record. Weak loan demand remains a persistent drag on the world's second-largest economy even as authorities have sought to broaden financing channels beyond traditional bank lending, including through equity and bond markets.
Momentum fading across the economy
China's economy lost momentum at the start of the second half, with industrial output and retail sales slowing as extreme weather disruptions and persistently weak domestic demand renewed pressure on policymakers to step up stimulus. The disappointing credit data follows second-quarter growth that cooled to a three-and-a-half-year low, highlighting China's continued dependence on exports to offset sluggish consumption and investment even as it confronts headwinds from U.S. tariffs and the conflict in the Middle East.
To bolster consumption and investment, Beijing recently expanded loan interest subsidies for small private firms and consumers and announced an injection of $54 billion into eight state-owned financial institutions to shore up their core capital and sustain lending. Policymakers last month also introduced new measures to stabilize the property sector, including stronger financing support for developers and an extension of the maximum mortgage term from 30 to 40 years to ease homebuyers' repayment burdens, though analysts remain cautious about the pace of a broader recovery in housing demand.
Money supply growth slows too
Broad M2 money supply expanded 7.5% from a year earlier in August, a 17-month low and below analysts' forecast of 7.6%, after growing 7.7% in July. The narrower M1 money supply climbed 4.1% year-on-year, compared with 4% in July.
Outstanding total social financing, a broad measure of credit and liquidity, rose 7.2% in August from a year earlier, down from 7.4% in July. Any acceleration in government bond issuance could boost that financing measure going forward.
Source: Economy News (Investing.com)
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