China’s banks expand lending but struggle with weakening demand

UOB Kay Hian said banks remain cautious in extending long-term credit.

China’s banking sector showed mixed signs in September, with new lending recovering but overall loan growth continuing to slow, according to a report by UOB Kay Hian.

UOB Kay Hian said that whilst short-term liquidity has improved, banks remain cautious in extending long-term credit amidst sluggish corporate borrowing.

The report added that additional fiscal measures may be needed to support domestic demand and sustain credit growth.

Data from the People’s Bank of China showed that banks issued $180.6b (RMB1.29t) in new loans in September, more than double August’s $82.6b (RMB0.59t) but slightly below market expectations of $189.0b (RMB1.35t).

However, the growth of outstanding bank loans eased to 6.6% year-on-year, marking the weakest pace so far this year.

Total social financing (TSF) rose to $494.2b (RMB3.53t), surpassing the forecast of $478.8b (RMB3.42t).

Despite the increase, outstanding TSF growth edged down to 8.7% year-on-year from 8.8% in August, indicating continued softness in private-sector credit demand.

($1.00 = RMB7.13)