Analysts say the problem is not a shortage of liquidity or credit, but souring business confidence as sales and profits weaken and the US-China trade war intensifies
China's banks extended more new yuan loans than expected in September as policymakers ramp up efforts to stabilise the cooling economy as US trade pressures build.
Chinese regulators have been trying to boost bank lending and lower corporate financing costs for over a year, but the pick-up in loan growth has been modest compared to previous rounds of stimulus, and economic activity has continued to slow.
Analysts say the problem is not a shortage of liquidity or credit, but souring business confidence as sales and profits weaken and the US-China trade war intensifies.
Chinese banks extended 1.69 trillion yuan ($238.98 billion) in new loans in September, up from August and exceeding analyst expectations, People's Bank of China data showed on Tuesday.
Analysts polled by Reuters had predicted new yuan loans would rise to 1.4 trillion yuan in September, up from 1.21 trillion yuan the previous month but largely in line with the tally in September last year.
Credit support from authorities for the real economy is increasing, Ruan Jianhong, an official with the PBOC, told reporters in a briefing, adding that the overall demand for credit remains relatively strong.
Household loans, mostly mortgages, rose to 755 billion yuan in September from 653.8 billion yuan in August, while corporate loans climbed to 1.01 trillion yuan from 651.3 billion yuan.
Broad M2 money supply in September grew 8.4% from a year earlier, above estimates of 8.2% forecast in the Reuters poll, which was unchanged from pace in August.
Outstanding yuan loans grew 12.5% from a year earlier, quicker than August's 12.4%. Analysts had expected a 12.3% growth.
Some analysts say the annual comparison is a better way to assess trends in China's credit growth, rather than more volatile monthly readings. China's credit growth has slowed after a modest pick-up in the first half of the year.
"The latest moderation in credit growth has been driven by slower bank lending to both households and enterprises," analysts at Capital Economics said in a recent note, adding that the lack of a more significant acceleration in lending hints at more risks to economic growth in the coming quarters.
Despite prodding from Beijing, several bankers have told Reuters they have little appetite to lend to smaller companies due to the uncertain economic outlook, the war and a years-long drive to purge risks from the financial system. Some firms also say banks are sharply reducing credit lines.
Many manufacturers and other companies which are borrowing may be doing to just to stay afloat, rather than expanding in any meaningful way, the latest private China Beige Book survey suggested.
Approximately the same 30% of manufacturers surveyed are borrowing every quarter, it said earlier this month.
"Either the sector as a whole is in clear distress or a large proportion of firms should be failing."
Corporate bond defaults, meanwhile, look set for another record year, though most have been by smaller, private firms.
In September, total social financing (TSF) rose to 2.27 trillion yuan, according to PBOC. It also revised up August's figure to 2.02 trillion yuan from 1.98 trillion yuan due to a change in the way it calculates TSF.
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