Chinese banks issued 949 billion yuan ($142 billion) in new yuan loans in August—and more than half of them were funneled into home buyers’ hands, amid a property market comeback.
56% of new bank loans issued in August went to households as “mid & long-term loans,” which are usually interpreted by China analysts to mean mortgage loans. That’s up 85% from a year earlier. In July, overall mortgage loans grew 8% from the month before. Those new loans represented over 100% of the total, because loan growth was offset by borrowers paying previous loans back.
Chinese banks are fueling the most recent home buying frenzy in first-tier cities. On Tuesday (Sept. 13), the National Bureau of Statistics said that home sale revenue and overall real estate area sold went up 39% and 26%, respectively (link in Chinese) in the January to August period, compared to a year earlier. In Shanghai, a rumor about stricter government controls over home buying pushed married couples to fake divorces, in order to qualify for a lower downpayment and interest rate when purchasing a second home.
Meanwhile, China’s M2, the widest measure of money supply—which includes cash in circulation and deposits—rose 11% in August year-over-year, also beating market expectations. But money is not going to where it is needed most, to companies investing in growth: Newly extended loans to non-financial enterprises in August was at 121 billion yuan, down 72% from a year earlier.
That’s because China’s private firms are not confident about the future of the country’s economy. Growth in fixed-asset investment, an indicator for capital spending in the long term, dropped in August and has been largely driven only by state-owned companies all year.