China Money August 2019


China: Credit conditions improve in August

September 11, 2019

In August, Chinese banks distributed CNY 1.21 trillion (USD 170 billion) in new yuan loans. The result was above the CNY 1.06 trillion in July and matched the result market analysts had expected. In the 12 months up to August, new yuan loans totaled CNY 16.3 trillion (12 months up to July: CNY 16.4 trillion).

Meanwhile, annual growth in M2—the broadest measure of money supply in China—rose from 8.1% in July to 8.2% in August. The print slightly exceeded the 8.1% rise that market analysts had expected.

Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—rose from CNY 1.01 trillion in July to CNY 1.98 trillion in August. Market analysts had expected CNY 1.55 trillion.

On 6 September, the People’s Bank of China announced a reduction in the amount of cash that banks must hold as reserves for the third time this year. The move included a general reduction in the reserve requirement ratio (RRR) of 50 basis points as well as additional cuts of 100 basis points for targeted institutions. As a result, the RRR for large banks was reduced from 13.5% to 13.0%, the lowest rate since 2007. The measure, effective 16 September, is expected to release around USD 126 billion in liquidity in order to support China’s faltering economy.

FocusEconomics Consensus Forecast participants expect M2 to expand 8.6% in 2019, which is unchanged from last month’s forecast. In 2020, the panel also sees M2 growth of 8.6%.

Author: Ricard Torné, Lead Economist

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China Money Chart

China Money August 2019

Note: New yuan loans in CNY billion and year-on-year variation of M2.
Source: People’s Bank of China (PBOC) and FocusEconomics calculations.

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