(Yicai Global) Sept. 13 -- China’s yuan-denominated loans increased at a rate 4.6 percent slower in August than the same period last year as companies’ credit demand weakens amid an economic slowdown and new restrictions on real estate purchases, according to the latest data.

Loans advanced by CNY1.22 trillion (USD189.05 billion) last month, down from CNY1.28 trillion a year earlier, the People’s Bank of China said on Sept. 10. Companies took out CNY521.5 billion (USD80.8 billion) in medium and long-term loans in August, a drop of 28 percent year on year, while short-term loans fell by CNY114.9 billion, doubling the decline from the same time last year.

The supply of M2, a broad measure of money supply that covers cash in circulation and all deposits, grew by 8.2 percent month on month, a slower rate than in July, and less than the 8.38 percent predicted by a Yicai Global poll of chief economists.

Narrow money M1, which includes currency and assets that can be quickly converted into cash, grew by 4.2 percent, again less than in July and a new low since February last year. This indicates a weakening in companies’ operational activities, said Wen Bin, chief researcher at China Minsheng Bank.

Regulation in the real estate sector is one of the reasons for the narrowing credit, said Liang Si, researcher at the Bank of China. The annual quota for personal housing loans at some banks has already been filled and there has been a clamping down on mortgages, which has cooled the housing market somewhat.

Social financing, though, a broad gauge of credit and liquidity in the economy, surged by CNY2.96 trillion (USD458.61 billion) in August, slightly more than the CNY2.82 trillion predicted in the Yicai Global poll, as July’s cut in the reserve requirement ratio boosted liquidity.

Newly-increased financing through equities reached CNY147.8 billion, the highest so far this year, Wen said. Newly-added financing via corporate bonds came to CNY434.1 billion, a 18 percent jump from the same period last year.

There is still huge inflationary pressure. China’s consumer price index, a key gauge of inflation, ticked up 0.8 percent in August from the same period last year, the National Bureau of Statistics said on Sept. 9. Factory gate prices, meanwhile, added 9.5 percent, the fastest growth in 13 years as the cost of raw materials surged.

Policymakers are not willing to see the stagflation generated by the rebound of the CPI amid downward pressure in the economy, said Ming Ming, deputy director of CITIC Securities Research Institute. There is unlikely to be further loosening of monetary policy which will remain prudent with no great possibility of an interest rate cut, he added.

Editors: Xu Wei, Kim Taylor