China: Credit growth disappoints in August; state-owned banks cut deposit rates
In August, Chinese banks distributed CNY 1250 billion in new yuan loans, up from July’s 679 billion figure but undershooting market expectations of CNY 1480 billion. While corporate loans surged amid the government’s policy easing, household loan growth was subdued amid weak consumer sentiment. Money supply increased 12.2% compared to the same month a year earlier in August, which was above July’s 12.0% increase. Meanwhile, growth in the stock of total social financing (TSF)—a broader measure of credit and liquidity in the economy—slowed to 10.5% yoy from 10.7% in August.
Regarding monetary policy, state-owned banks agreed to cut deposit rates in mid-September—the first such cut in deposit rates since 2015—after the PBOC trimmed a host of interest rates in August. The reduction in deposit rates should increase leeway for further lending rate cuts in the months ahead. However, the impact of monetary easing on economic activity is likely to be limited as long as the property sector remains in a tailspin and the government maintains its zero-tolerance approach to new Covid-19 cases. The Consensus is for key policy rates to be trimmed marginally by the end of the year.