China August money and credit data Report Interpretation

Overview

This data-tracking note examines China’s August money and credit figures. Goldman Sachs finds that credit extension undershot expectations because bank lending and government bond issuance slowed, with weak household and corporate loan demand remaining a key drag.

Core views

Goldman Sachs reports that August money and credit data fell short of market expectations. New RMB loans were RMB 60bn, including RMB 55bn of loans to the real economy, versus the institution’s RMB 300bn forecast and Bloomberg consensus of RMB 404bn. Total social financing (TSF) was RMB 1,660bn, also below Goldman Sachs’ RMB 2,000bn forecast and the RMB 2,122bn consensus. The report attributes the miss principally to slower bank loan extension and weaker government bond issuance. After seasonal adjustment, TSF flows declined from July to August as government bond net issuance fell to RMB 635bn from RMB 1,450bn, while loan extension decreased to RMB 730bn from RMB 995bn. The weaker flow translated into slower TSF stock growth of 7.2% year on year in August, down from 7.4% in July; the implied seasonally adjusted annualized month-on-month growth rate fell to 4.8% from 8.5%. Bank lending data point to subdued credit demand across households and corporates. Outstanding RMB loan growth slowed to 4.9% year on year in August from 5.1% in July, with Goldman Sachs estimating the seasonally adjusted annualized monthly pace at 3.6%, versus 4.3% in July. Household loans declined RMB 203bn, compared with a RMB 30bn increase a year earlier. Corporate loans rose RMB 260bn, well below the RMB 590bn extension a year earlier. Monetary aggregates showed a mixed pattern. M1 growth edged up to 4.1% year on year from 4.0% in July, but M2 growth moderated to 7.5% from 7.7%, matching Goldman Sachs’ forecast but slightly below Bloomberg consensus of 7.6%. The report links the M2 moderation mainly to slower deposit growth among non-bank financial institutions. Fiscal deposits increased RMB 110bn in August, around RMB 80bn less than a year earlier, which Goldman Sachs interprets as suggesting slightly faster fiscal spending.

Analysis framework

Goldman Sachs compares reported August lending, TSF and money-supply data with its forecasts, market consensus, July readings and year-earlier flows. It then uses the component breakdown and seasonally adjusted flow measures to identify weaker loan extension and government bond issuance as the main drivers.

Methodology notes

• Industry AnalysisSupply-demand framework

  Credit-demand and financing-flow decomposition

  The report separates household and corporate loan flows, bank lending and government bond issuance to explain why aggregate financing growth weakened.

Key data

• New RMB loansRMB 60bn in AugustRMB 55bn went to the real economy; below Goldman Sachs’ RMB 300bn forecast and Bloomberg consensus of RMB 404bn.
• TSF flowRMB 1,660bn in AugustBelow Goldman Sachs’ RMB 2,000bn forecast and Bloomberg consensus of RMB 2,122bn.
• TSF stock growth7.2% yoy in AugustDown from 7.4% yoy in July; implied seasonally adjusted annualized monthly growth was 4.8%, versus 8.5%.
• Government bond net issuanceRMB 635bn in AugustSeasonally adjusted flow, down from RMB 1,450bn in July.
• Household and corporate loansRMB -203bn and RMB 260bnHousehold loans fell versus a RMB 30bn increase a year earlier; corporate loan extension was below RMB 590bn a year earlier.
• M1 and M2 growth4.1% yoy and 7.5% yoy in AugustM1 rose from 4.0% in July, while M2 slowed from 7.7%.

Impact & implications

The report’s data breakdown indicates that August’s financing slowdown was broad-based: reduced government bond issuance weakened TSF while both household and corporate lending remained soft. The moderation in M2 growth chiefly reflected slower non-bank financial-institution deposit growth, while the fiscal-deposit comparison suggested slightly faster fiscal spending.