China’s bank lending in August greater than doubled from your previous month, but analysts said a great deal of the gain was because of strong mortgage demand, increasing evidence that Chinese companies are increasingly reluctant to make new investments.
The figures, as well as other data in the week, paint a photograph of your economy that is improving slowly but increasingly dependent on a housing boom and government spending for growth.
Chinese banks extended 948.7 billion yuan ($142.23 billion) in 房貸 in August, well above expectations, while broad M2 money supply (M2) also grew with a more-than-expected 11.4 percent coming from a year earlier, based on central bank data on Wednesday.
New bank lending rebounded sharply from July’s 463.6 billion yuan, that has been the lowest in 2 years, while M2 quickened from July’s 10.2 percent rise, which was the weakest in 15 months.
The central bank has pledged to hold policy slightly loose, but sources say it is actually hesitant to cut rates of interest or bank reserves again inside the near term amid evidence that companies and banks are hoarding cash as opposed to investing it.
“A renewed pick-up in credit growth last month will enhance the growing sense among investors the near-term outlook for China’s economy is fairly bright,” said Julian Evans-Pritchard at Capital Economics.
“Credit growth remains to be likely to slow over coming months since the PBOC refrains from further easing and focuses more about credit risks. But with recent activity data also strengthening, we expect economic growth to strengthen across the remainder of the year.”
Data on Tuesday showed China’s factory output and retail sales also grew faster than expected in August being a strong housing marketplace and a government infrastructure spending spree underpinned growth in the world’s second-largest economy.
But August readings also highlighted imbalances from the economy, with private investment growth at record lows and exports still sluggish.
China’s increasingly dependence on the home market is yet another major concern, as more cities impose restrictions on home purchases within the face of sharply rising house prices, threatening to finish a near one-year rally.
A sharp price correction would enhance strains on banks which can be already wrestling with growing variety of bad loans.
Household loans, mostly mortgages, taken into account 71 percent of total new bank loans in August, though these were down from more than 90 % in July, data showed.
“Mortgage loans remain the main driver of loan growth, according to booming housing marketplace and weak loan demand from corporates,” David Qu and Raymond Yeung at ANZ said inside a note.
Outstanding yuan loans grew at 13 percent by month-end on an annual basis.
Analysts polled by Reuters had expected new lending of 750 billion yuan, with outstanding loans seen rising 12.9 percent, and funds supply seen up 10.4 percent.
Total social financing (TSF), a broad way of measuring credit and liquidity from the economy, jumped to 1.47 trillion yuan in August from 487.9 billion yuan in July.
TSF includes off-balance sheet forms of financing that can be found outside the conventional bank lending system, including initial public offers, 房屋貸款 from trust companies and bond sales.
M1 money supply, which includes cash and short-term deposits, rose 25.3 percent in August from a year earlier. The widening gap between M1 and M2 growth has fueled concerns with regards to a “liquidity trap” in dexrpky35 economy where companies remain wary of investing irrespective of how much stimulus money policymakers pump in to the system.
“The rapid growth and development of M1 money supply indicates corporates’ preference of holding cash as opposed to investment. This can be consistent with all the slowing trend in fixed asset investment from the private sector,” ANZ said.
Chester Liaw, an economist at Forecast Pte Ltd in Singapore, said the spread between M1 and M2 growth narrowed to 13.9 percentage points from 15.2 last month but “remains at elevated levels.”
The PBOC is concentrating on annual M2 expansion of around 13 percent this current year, pointing to continued accommodative policy as Beijing pledges to set about painful economic restructuring involving state-owned enterprises in key industrial sectors.
Policy insiders have claimed that evidence companies and banks are hoarding cash, alongside concerns about property market along with the yuan’s stability, has reinforced policymakers’ view there is no major benefit in easing policy further.