Money market,

The pressure on banks’ loancreation engine was evident in data last week. New yuan loans in August fell short of forecast. And the aggregate lending figure, including shadow banking, showed borrowers are increasingly having to turn to the debt market. Sales of short-term bills by non-financial companies surged to the highest since February 2009. With bond yields on the rise thanks in part to record default rates, borrowers are increasingly stuck.

One sign of the impact of tougher credit conditions came Friday, with data showing the smallest gain in investment spending on record. China could have a new round of supportive measures to stabilize investments, the Economic Information Daily reported on Tuesday, without saying where it got the information.

Savers have plenty of reason to keep turning to money-market funds, after the Shanghai Composite Index of stocks tumbled into a bear market and bond defaults made credit a risky option. The market expanded 12% in July, up 28-fold from 2013, Asset Management Association of China data show.

The world’s biggest fund, Yu’EBao, illustrates the challenge for policy makers. It has 62% of its 1.45 trillion yuan in bank deposits and 9.4% in bonds — mostly sovereign and policy-bank notes, according to the latest report posted on the website of Tianhong Asset Management Co., which manages Yu’EBao.

LIMITS IMPOSED

Authorities have appeared to recognize the issue, last year asking Alibaba Group Holding Ltd.’s Ant Financial affiliate, which holds a majority of the Yu’EBao manager, to cut the maximum amount individuals can invest in it. Other funds have taken action more recently, with Harvest Fund Management Co. starting to curb daily aggregate subscriptions for each account from August, after Penghua Fund Management Co. started doing so in July.

The main consideration is to ensure healthy development of fund performance and size so that investors’ interest can be protected, according to an emailed reply from Harvest Fund Management when asked about the reasons behind the change. Tianhong and Penghua declined to comment.

“While these products do bring convenience and become good investments for households, the economy hasn’t benefited, and it even brings risks to the financial system,” said BBVA’s Xia. “This has caught regulators’ attention,” and their guidance might be behind the recent curbing measures, he said. •