China’s September bank loans are out and total aggregate financing for the month reached RMB1.65 trillion, up from RMB1.2407 trillion in August. Net new RMB loans amounted to RMB623.2 billion, down from RMB703.9 billion in August, and below estimates of RMB700 billion.
While bank loan growth continues to appear weak, consistent with the overall trend throughout the year, other main sources of funds in September were corporate bonds, undiscounted bankers’ acceptances, and, more alarmingly, trust loans (which form part of the shadow banking system). In particular, financing from trust loans for September increased from RMB118 billion in August to RMB202.4 billion:
The People’s Bank of China also published the latest monetary statistics for the 3rd quarter.
M2 money supply rose 14.8% compared with a year ago, better than the 13.8% yoy increase as expected by the market, and up from 13.5% yoy. M1 money supply increased 7.3% yoy, and M0 rose by 13.3%. The expansion of money supply has accelerated by all three measures.
New RMB loans for September, as reported in the aggregate financing report, was RMB623.2 billion, which is . New loans to household amounted to RMB330 billion for the month, while new loans to non-financial companies amounted to RMB310 billion, of which short-term loans and bill financing accounted to RMB186 billion of loans to non-financial institutions, and medium and long-term loans remains sluggish at RMB103 billion according to my own calculations. This bring total net new loans year-to-date to RMB6.72 trillion.
On the deposit side, total RMB deposit amounted to RMB89.96 trillion, an increase of RMB1.656 trillion from August.
Meanwhile, foreign reserves increased slightly from US$3.24 trillion to US$3.29 trillion. On a year-on-year basis, FX reserves increased by 2.8%. It is worth noting that China’s foreign reserve remains at around US$3.2-3.3 trillion for more than a year now without any significant expansion in size beyond monthly fluctuation:
The new loans data, no doubt, was disappointing. Demand for medium and long-term loans appears to remain very weak, consistent with the recent trend. The new loans data, however, are not very consistent with the further pick-up in M2 growth. It appears that as Chinese companies are relying ever more on funding sources outside of the banking system, in particular, the loans from trusts industry, a funding source which once the government was keen to manage but is somehow being allowed to explode now, and these sources appear to be what drive the growth in broader money supply.
All of the data points taken together paint a picture which is less grim than the loans data in isolation.