BEIJING (Reuters) - Despite the central bank's efforts to boost demand, COVID flare-ups and a worsening housing crisis have weighed heavily on the economy in China, where new bank lending increased less than anticipated in August and broad credit growth slowed.
According to figures provided by the People's Bank of China (PBOC) on Friday, banks extended 1.25 trillion yuan ($180.63 billion) in new yuan loans in August, up from July but less than analysts had predicted.
China's new bank loans increased less than anticipated in August, and credit growth slowed.
According to Reuters' poll of analysts, fresh yuan loans will increase to 1.48 trillion yuan in August, which would be higher than the 1.22 trillion yuan in the same month last year and more than double the 679 billion yuan in the previous month.
According to data from the central bank, household loans, which include mortgages, increased to 458 billion yuan from 121.7 billion yuan in July, while business loans increased to 875 billion yuan from 287.7 billion yuan.
Analysts claim that despite this, credit demand is still low due to shaky consumer and company confidence.
According to Luo Yunfeng, an analyst at Merchants Securities, "August lending statistics was led by increasing medium- and long-term business loans, while household loans remain relatively poor."
As of September 6, 49 cities, accounting for up to 21% of China's population and approximately 25% of its GDP, were reportedly under some form of COVID lockdown, according to Nomura.
A mortgage boycott has severely impacted the real estate industry, which has been heavily hit by the debt crisis as homebuyers refuse to make payments for delayed projects. Construction and sales of new homes have declined.
This quarter is a crucial one for policy action as data indicates to a further loss of momentum, policymakers said on Monday, reinforcing a fresh feeling of urgency for efforts to support the ailing economy.
On August 22, the central bank decreased the five-year LPR, which has an impact on mortgage rates, by a larger percentage than it did the one-year LPR, which serves as its benchmark lending rate.
Little To no ROOM FOR EASING
Compared to the same month a year prior, the consumer price index (CPI) rose 2.5% in August, according to statistics from the National Bureau of Statistics (NBS). According to analysts, declining inflation may allow for more monetary policy relaxation.
In a note, Capital Economics stated that "any major acceleration in loan growth in the short term looks increasingly doubtful."
"In August, the PBOC slightly lowered its benchmark interest rates. Additionally, restrictions on quantitative data have been relaxed. The People's Bank (of China) is pulling at a thin thread, though. The issue is with demand."
Central bank statistics revealed that the broad M2 money supply increased by 12.2% from a year earlier, exceeding expectations of 12.1% in the Reuters poll. M2 increased 12% from a year ago in July.
At the end of August, the amount of outstanding yuan loans was 10.9% higher than it was a year earlier, down from the previous month's 11% rise. 11% growth was predicted by analysts.
By the end of October, local governments will issue 500 billion yuan in carryover special bonds to fund infrastructure projects as part of their efforts to strengthen the economy.
Any increase in the issue of government bonds could support total social finance (TSF), a comprehensive indicator of credit and liquidity.
Total social finance (TSF) growth, a broad indicator of credit and liquidity in the economy, decreased from 10.7% in July to 10.5% in August.
TSF covers off-balance sheet financing options that are available outside of the traditional banking system, include bond sales, trust company loans, and initial public offerings.
TSF increased from 756.1 billion yuan in July to 2.43 trillion yuan in August. Reuters polled analysts, and they predicted 2.075 trillion yuan.
(1) Chinese Yuan renminbi = 6.9176
