Better-than-expected credit growth in August eased some concerns over the momentum of the economy, while sluggish corporate lending points to the need for stronger fiscal policy, analysts said.
New credit growth in August registered 948.7 billion yuan ($142.1 billion), up by 17.1 percent year-on-year, according to data released on Wednesday by People's Bank of China.
Total social financing, the central bank's gauge of the broad measure of credit in the economy, was 1.47 trillion yuan in August－three times higher than the 487.9 billion yuan in the previous month.
"The higher-than-expected data eased some worries about the momentum of economic growth," said Jiang Chao, chief economist with Haitong Securities.
However, Jiang noted that the real estate sector largely fueled the credit growth in August, when medium－and long-term household loans increased by 528.9 billion yuan compared with the same period last year.
That is in line with data released by the National Bureau of Statistics on Tuesday, which showed that revenue from housing sales went up by 39 percent from January to August, compared with the same period last year.
But the corporate sector "still has weak demand for lending", Jiang said.
Loans to the nonfinancial sector in August stood at 121 billion yuan－72 percent lower year-on-year, data showed.
In the meantime, the M1 money supply rose by 25.3 percent in August year-on-year, while M2 registered a growth increase of 11.4 percent from a year earlier.
M1, which includes cash and demand deposits, is the narrow measure of the money supply, while M2, a broader measure, includes cash and all types of deposits.
Although the divergence of M1 and M2 was slightly smaller than the previous month, "China still faces the risk of falling into the liquidity trap", said Su Jian, an economics professor at Peking University. Su was referring to the situation in which money pumped into the market fails to enter the real economy.
Liang Hong, chief economist with China International Capital Corp, said she expected that there is limited room for monetary policy relaxation, considering the recent housing price surge and the fluctuation of the currency exchange rate.
She said that proactive fiscal policy, including measures to reduce tax burdens for enterprises, would help liquidity flows to the real sector.
