MNI BRIEF: China Aug M1 Drops Further To Hit Record Low

China's M1 money supply contracted for a fifth consecutive month in August, falling by 7.3% y/y to a record low, as corporate demand deposits continue to decrease amid an ongoing property downturn, People's Bank of China data released Friday showed.

Growth in the M2 measure was 6.3%, unchanged from July's 6.3% growth and beating the 6.2% forecast.

Banks extended CNY900 billion in new loans in August, rising from July's CNY260 billion. Total social financing rose by CNY3.03 trillion, jumping from growth of CNY770 billion in July. Shadow banking transactions increased by CNY116.1 billion, compared to a CNY75.7 billion contraction the previous month.

Sources told MNI the PBOC will have to cut the 7-day reverse repo rate by more than 10 basis points soon, as deflationary pressure builds and real funding costs remain high across the economy, while simultaneously stepping up its government bond trades to steepen the yield curve. (See MNI: PBOC Seen Cutting Repo Rate Soon, Boosting Bond Trades)