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BEIJING, Sept. 16 (Xinhua) -- China's latest bank loan data shows that although the housing market is booming, the private sector seems reluctant to invest.
Chinese banks made 948.7 billion yuan (142.23 billion U.S. dollars) in net new yuan loans in August, more than double the figures from a month earlier and well above expectations, the People's Bank of China said Wednesday.
Such strength was mainly due to strong mortgage lending, consistent with robust property sales, said UBS China economist Wang Tao.
Most of the new loans were home loans, with central bank figures showing these increased by more than 670 billion yuan.
The property market has seen prices and sales increase substantially over the past months, boosted by growth policies such as interest rate cuts and lower deposit requirements.
New home prices in China's 10 biggest cities rose 17.2 percent year-on-year to hit an average 22,945 yuan (3,459 U.S. dollars) per square meter in July, according to the China Index Academy. Prices of resold homes increased by even more.
Amid a weakening real economy, banks have shown an intent to increase mortgage lending. Recently, Citic Bank President Sun Desheng made mortgage-lending one of his top priorities for H2.
Meanwhile, corporate loans increased by just 121 billion yuan, and bill discounts increased by 224 billion yuan. Figures for short, medium, and long-term corporate loans contracted.
"Such a composition of new corporate lending may reflect weak investment intentions at the corporate level on one hand, and pressure for banks to demonstrate their support for the real economy on the other," Wang Tao said.
China's economy showed signs of stabilization last month as growth measures supported investment and industrial output. Solid investment in property and infrastructure were the major contribution.
Amid encouraging data, overdependence on the property market, which runs a risk of causing asset bubbles, is still a major concern for the economy.
The central bank data showed that M2, a broad measure of the money supply that covers cash in circulation and all deposits, had grown by 11.4 percent year-on-year by the end of August.
M1, a more narrow measure of the money supply, which covers cash in circulation and demand deposits, rose 25.3 percent year on year, almost on par with the previous month.
The spread between M2 and M1 growth narrowed to 13.9 percentage points from 15.2 last month, but was still elevated.
The wide gap between M2 and M1 fuels concerns about a "liquidity trap," where companies remain wary of investing regardless of stimulus from policy makers.
Looking forward, Wang expects credit growth to stabilize at the current pace, which will help investment and growth in the coming months.
Strong mortgage lending growth coupled with rapid increases in housing prices in a few cities may worry policy makers and lead them to ponder possible measures to contain potential property risks, Wang said.
In a research note, investment bank China International Capital said that continued economic reflation and rising property prices, as well as exchange rate concerns, will constrain the scope for monetary easing.
"We expect no interest rate cuts in the second half of 2016 and recognize that the real challenge to monetary policy is the effectiveness of transmission. Coordinated fiscal efforts can facilitate the channeling of hoarded liquidity to the real economy," it said.
Related:
China's new yuan loans more than double in August
BEIJING, Sept. 14 (Xinhua) -- China's new yuan loans surged in August as mortgage loans soared amid a property market frenzy, official data showed on Wednesday.
New yuan-denominated lending more than doubled from a month ago to 948.7 billion yuan (about 145.95 billion U.S. dollars), the People's Bank of China said in a statement on its website. Full story
