China has been struggling to overcome the collapse of demand for borrowing linked to the property sector
[BEIJING] China’s credit growth slowed from a year ago in August with its loan expansion falling short of forecasts, as demand for financing stayed soft while the government borrowed less to fund spending such as infrastructure investment.
Aggregate financing, a broad measure of credit, increased 2.6 trillion yuan (S$468.5 billion) in August, according to Bloomberg calculations based on data released by the People’s Bank of China on Friday. That compares with a median forecast of 2.5 trillion yuan by economists in a Bloomberg survey and an expansion of 3 trillion yuan recorded a year ago
Financial institutions recorded an expansion of 589 billion yuan of new loans in the month. The median forecast was an increase of 700 billion yuan
China has been struggling to overcome the collapse of demand for borrowing linked to the property sector as housing prices crashed. Despite the government’s effort to funnel cheap credit into manufacturing and the high-tech sectors, overall loan demand remains sluggish as corporate profits thinned and jobseekers face gloomier prospects.
That’s weakened the transmission of looser monetary policy into the economy. Since the pandemic, the PBOC has lowered interest rates and slashed the amount of money banks have to set aside in reserves to encourage lending.
Following the latest round of easing in May, many analysts now expect policymakers to wait before taking action again, in part because of concerns over a stock rally in the onshore market.
In July, outstanding loans contracted for the first time since 2005, amplifying worries about an economic downturn.
A smaller volume of government bond issuance in August was an important factor in determining the pace of credit growth, after faster borrowing earlier in the year boosted expansion.
“We don’t see much upside for genuine credit demand,” Citigroup analysts including Yu Xiangrong said in a report before the data release. “For households, the property sector remains weak and the start of consumer loan interest subsidies from September could also delay some borrowing decisions. Anti-involution efforts could weigh on corporate demand.” BLOOMBERG
