China M2 Hits Another Low In Aug Despite Bank Loan Growth

     BEIJING (MNI) - China's M2 money supply growth in August hit another

historic low even as bank loan issuance remained strong, according to central

bank statistics released Friday.

     M2 rose 8.9% year-on-year to CNY164.52 trillion, compared with the previous

record-low growth of 9.2% in July.

     "Banks who have liquidity pressure on their liabilities side maintained a

high pace in issuing loans, crowding out the space to invest in bonds," the Bank

of Communications Financial Research Center said in a report on Friday. "So the

channel to create money via bonds has been weakened."

     "The M2 grew 11.4% last August, higher than 10.2% growth last July," it

said. "The base effect also made the M2 growth this August lower."

     China's total social financing (TSF) increased significantly to CNY1.48

trillion in August, compared with an increase of CNY1.22 trillion in July, and

above the expected MNI survey median for a CNY1.30 trillion rise.

     Yuan loans to the real economy, the largest contributor to TSF, totaled

CNY1.15 trillion in July, CNY349.7 billion higher than the same period last

year.

     The net financing of corporate bonds slowed in August to a CNY106.3 billion

increase, compared with a rise of CNY284 billion in June.

     Shadow bank financing rebounded in August. The sum of shadow banking, which

comprises entrusted loans, trust loans and undiscounted bankers' acceptances,

increased CNY130.3 billion, compared with a contraction of CNY64.4 billion in

July. Undiscounted bankers' acceptances recorded an increase of CNY24.2 billion

in August, significantly higher than a contraction of CNY203.9 billion in July.

     New loans increased CNY1.09 trillion in August, higher than the growth of

CNY825.5 billion in July, and also higher than the median MNI survey expectation

of CNY950 billion.

     Medium- to long-term loans for the household sector, mainly comprising

mortgages, grew CNY447 billion in August, slightly down from an increase of

CNY454.4 billion in July.

     "Part of the mortgage loans will be used for second-hand real-estate

purchases," a Beijing-based economist requesting anonymity told MNI. "So a

stronger mortgage loan level will not necessarily lead to a stronger real

economy."

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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