Chinese lending data shows growth deceleration has been arrested, Barclays says

Total new loans extended in China rose to a pace of 857.2bn yuan in August from 702.5bn yuan in the month before, ahead of expectations from analysts at Barclays Research for an increase to 720bn yuan, led by increased short-term corporate financing.

The latter reached 164bn yuan, up from the contraction of 69bn yuan seen in July.

In the opinion of the authors of the report, Jian Chiang and Bill Diviney, the above data were “further indication that August’s growth deceleration has been arrested.”

Nevertheless, medium-term loans also increased, the broker pointed out.

So-called ‘total social financing’ also improved, to 1,050bn yuan from 957bn yuan in the month before, as result of greater direct lending, which compensated for a fall in off-balance sheet financing.

Barclays also points out the large increase seen in equity financing from one month to another.

The economists added that, “in our view, without lowering the benchmark deposit rate, lending rates cannot be lowered meaningfully. Therefore, we maintain our forecast of two 25bp cuts in benchmark market interest rates, one in Q4 14 and one in Q1 15.”