China’s credit growth rebounds on seasonal boost, policy support

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TOKYO/BEIJING (Sept 11): China’s credit growth rebounded faster than expected in August after a seasonal decline the previous month, signaling policy efforts to channel funds to companies may be gaining further traction.

Aggregate financing was 1.98 trillion yuan (US$278 billion) last month, compared to about 1.01 trillion yuan in July, the People’s Bank of China said on Wednesday. The median estimate of economists was 1.6 trillion yuan.

Key Insights

Financial institutions offered 1.2 trillion yuan of new loans in the month, matching projections.
Broad M2 money supply grew 8.2% from a year earlier, marginally faster than in July.
August’s credit growth is usually faster than in July, with the increase in 2019 outpacing the average expansion in the past few years.

The data signal China’s policy makers are seeing some success in their efforts to increase the supply of credit to the slowing economy. In recent weeks, the People’s Bank of China has cut the amount of funds that banks have to hold in reserve, and introduced a new loan benchmark that’s intended to help bring down funding costs.

“The government’s recent easing measures, including the reserve-ratio cut and initiatives to bring forward more local government bond issuance, should help to support total-social financing growth to rebound in the rest of the year,’’ said Wang Tao, chief China economist at UBS AG in Hong Kong. “This credit rebound should then help to offset the additional negative impact from additional tariff hikes that will hit Chinese exports in October and December.”

Entrusted loans, organized by a bank between borrowers and lenders, fell 51.3 billion yuan.
Trust loans, made by trust companies to finance infrastructure and real estate, decreased by 65.8 billion yuan.
Bankers’ acceptance, short-term credit issued by a company with a bank’s guarantee, increased by 15.7 billion yuan.