Credit data ease con­cerns over growth

China Daily (USA) - - TOP NEWS - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

Bet­ter-than-ex­pected credit growth in Au­gust eased some con­cerns over the mo­men­tum of the econ­omy, while slug­gish cor­po­rate lend­ing points to the need for stronger fis­cal pol­icy, an­a­lysts said.

New credit growth in Au­gust reg­is­tered 948.7 bil­lion yuan ($142.1 bil­lion), up by 17.1 per­cent year-on-year, ac­cord­ing to data re­leased on Wed­nes­day by Peo­ple’s Bank of China.

Total so­cial fi­nanc­ing, the cen­tral bank’s gauge of the broad mea­sure of credit in the econ­omy, was 1.47 tril­lion yuan in Au­gust — three times higher than the 487.9 bil­lion yuan in the pre­vi­ous month.

“The higher-than-ex­pected data eased some wor­ries about the mo­men­tum of eco­nomic growth,” said Jiang Chao, chief econ­o­mist with Haitong Se­cu­ri­ties.

How­ever, Jiang noted that the real es­tate sec­tor largely fu­eled the credit growth in Au­gust, when medium- and long-term house­hold loans in­creased by 528.9 bil­lion yuan com­pared with the same pe­riod last year.

That is in line with data re­leased by the Na­tional Bureau of Statis­tics on Tues­day, which showed that rev­enue from hous­ing sales went up by 39 per­cent from Jan­uary to Au­gust, com­pared with the same pe­riod last year.

But the cor­po­rate sec­tor “still has weak de­mand for lend­ing”, Jiang said.

Loans to the non­fi­nan­cial sec­tor in Au­gust stood at 121 bil­lion yuan— 72 per­cent lower year-on-year, data showed.

In the mean­time, the M1 money sup­ply rose by 25.3 per­cent in Au­gust year-on-year, while M2 reg­is­tered a growth in­crease of 11.4 per­cent from a year ear­lier.

M1, which in­cludes cash and de­mand de­posits, is the nar­row mea­sure of the money sup­ply, while M2, a broader mea­sure, in­cludes cash and all types of de­posits.

Al­though the di­ver­gence of M1 and M2 was slightly smaller than the pre­vi­ous month, “China still faces the risk of fall­ing into the liq­uid­ity trap”, said Su Jian, an eco­nomics pro­fes­sor at Pek­ing Uni­ver­sity. Su was re­fer­ring to the sit­u­a­tion in which money pumped into the mar­ket fails to en­ter the real econ­omy.

Liang Hong, chief econ­o­mist with China In­ter­na­tional Cap­i­tal Corp, said she ex­pected that there is limited room for mone-tary pol­icy re­lax­ation, con­sid­er­ing the re­cent hous­ing price surge and the fluc­tu­a­tion of the cur­rency ex­change rate.

She said that proac­tive fis­cal pol­icy, in­clud­ing mea­sures to re­duce tax bur­dens for en­ter­prises, would help liq­uid­ity flows to the real sec­tor.

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