China credit growth and domestic demand Report Interpretation

Overview

This data review assesses China’s August credit and liquidity indicators. Nomura concludes that record-low aggregate-financing and RMB-loan growth underscore persistently weak private-sector credit demand and no meaningful recovery in domestic demand.

Core views

August aggregate financing (AF) totaled RMB1,658bn, below the RMB2,124bn market consensus and August 2025’s RMB2,566bn, though close to Nomura’s RMB1,705bn forecast. Outstanding AF growth slowed to a fresh historical low of 7.2% year-on-year from 7.4% in July. Nomura identifies bank lending as the main cause of the slowdown, while net government bond financing reverted to being a drag after providing support for only one month. New RMB loans totaled RMB60bn, well below consensus of RMB404bn and RMB590bn a year earlier, but nearer Nomura’s RMB150bn forecast. The report describes this as the lowest August result since 2001 and the second lowest reading since 2000. Outstanding RMB loan growth declined further to a record-low 4.9% year-on-year from 5.1% in July. Nomura argues that the RMB10trn debt-resolution programme has had some effect on loan growth, but that the more recent weakening cannot be attributed to that programme alone; it instead signals still highly depressed private-sector credit demand. The weakness was broad-based across corporate and household borrowers. New corporate RMB loans fell to RMB260bn from RMB590bn a year earlier: short-term loans were -RMB160bn versus RMB70bn, and medium- to long-term loans were RMB320bn versus RMB470bn. New bill financing rose to RMB100bn from RMB53bn; the report treats higher bill financing as an inverted indicator of credit demand. Household RMB loans dropped to -RMB203bn from RMB30bn a year earlier, with short-term loans at -RMB122bn and medium- to long-term loans at -RMB82bn. Nomura links the continued weakness in household lending to balance-sheet repair amid the property downturn. Within AF, new RMB loans excluding financial-institution lending were RMB55bn, compared with -RMB590bn a year earlier. Net government bond financing fell to RMB1,010bn from RMB1,367bn, while net corporate bond financing increased to RMB271bn from RMB134bn. Nomura notes that stronger corporate bond financing was insufficient to offset the slump in corporate loans. Undiscounted bankers’ acceptance financing declined to RMB38bn from RMB197bn, while shadow financing, including trust and entrusted loans, was -RMB1bn versus -RMB19bn a year earlier. Money growth also softened overall. M2 growth fell to 7.5% year-on-year from 7.7% in July, while M1 growth edged up to 4.1% from 4.0%. New RMB bank deposits declined to RMB1,200bn from RMB2,060bn a year earlier, with lower non-bank financial-institution, fiscal, household and corporate deposits. Liquidity conditions nevertheless loosened: average DR007 declined to 1.399% from 1.418%, near the PBoC’s 1.40% seven-day reverse-repo rate, and the average 10-year China government bond yield fell to 1.698% from 1.738%. The PBoC made a net RMB48bn liquidity injection in August. Nomura says the credit figures are consistent with other August releases showing no meaningful improvement in domestic demand. Although the late-July Politburo meeting pledged stronger counter-cyclical adjustment and faster government bond issuance and fiscal spending, the August government-financing result indicates that more needs to be done. Nomura continues to expect fiscal policy to take the lead in coming months, but believes it is unlikely by itself to reverse slowing RMB loan growth.

Analysis framework

Nomura compares August credit, financing, deposit, money-supply and liquidity data with July, the prior year, market consensus and its own forecasts. It then decomposes aggregate financing and bank lending by borrower and instrument to identify the sources of weaker credit demand and assess the likely role of fiscal policy.

Methodology notes

• Industry AnalysisSupply-demand framework

  Credit-demand analysis through the composition of household, corporate and government financing.

  The report uses changes in loan and financing components to distinguish weak private-sector borrowing demand from government-financing support.

• MacroeconomicsCredit and Debt Cycle

  Credit growth and household balance-sheet repair amid a property decline.

  Nomura interprets record-low loan growth and negative household borrowing as signs of ongoing balance-sheet repair and depressed credit demand.

Key data

• New aggregate financingRMB1,658bnAugust; versus consensus of RMB2,124bn, Nomura forecast of RMB1,705bn and RMB2,566bn in August 2025
• Outstanding aggregate financing growth7.2% y-o-yDown from 7.4% in July and a fresh historical low
• New RMB loansRMB60bnAugust; versus RMB404bn consensus, RMB150bn Nomura forecast and RMB590bn a year earlier
• Outstanding RMB loan growth4.9% y-o-yDown from 5.1% in July and a fresh historical low
• Household new RMB loans-RMB203bnVersus RMB30bn a year earlier
• Corporate new RMB loansRMB260bnVersus RMB590bn a year earlier
• M2 growth7.5% y-o-yDown from 7.7% in July
• 10-year CGB yield1.698%Monthly average in August, down from 1.738% in July

Impact & implications

Nomura interprets the data as confirming weak domestic demand and depressed private-sector credit appetite. It expects fiscal policy to become the main support channel in coming months, but does not expect fiscal measures alone to reverse the slowing trend in RMB loan growth while household balance sheets continue to repair.

What to watch

• The pace of government bond issuance and fiscal spending following the late-July Politburo pledge.
• Whether household and corporate RMB lending shows a sustained recovery from current weak levels.
• Further changes in aggregate-financing, M1 and M2 growth indicators.