Investment Highlights:
The growth rate of outstanding social financing slowed in August. In August 2026, the newly added social financing scale was 1.66 trillion yuan, a year-on-year decrease of 908.3 billion yuan; the growth rate of outstanding social financing was 7.2%, down 0.2 percentage points from the previous month. Structurally, the year-on-year decrease in social financing in August mainly came from RMB loans and government bond financing, while corporate bond financing continued to improve.
RMB loans increased less year-on-year. In the month, RMB loans under the social financing scope increased by 55.2 billion yuan, a year-on-year decrease of 570.1 billion yuan. Besides persistent factors such as debt resolution, economic structural transformation, and substitution by direct financing, the weak credit in August was also related to the continued weakening of real estate and infrastructure investment, as well as the resurgence of global inflation expectations and the upward pressure on raw material prices, which constrained corporate operations and investment willingness.
Government bond financing increased less year-on-year. Newly issued government bonds in the month totaled 1.01 trillion yuan, a year-on-year decrease of 357.5 billion yuan. This was mainly affected by the high base in the same period last year and the large scale of maturing national bonds. Regarding special bonds, the issuance pace accelerated, with net financing from new special bonds and refinancing special bonds increasing by 9.6 billion yuan and 130.3 billion yuan year-on-year, respectively. Looking ahead, as the issuance pace of government bonds gradually accelerates, the drag of government bond financing on social financing is expected to gradually weaken. However, the extent to which fiscal policy can drive credit expansion still depends on the speed of fund transmission to real economic activity.
Corporate bond financing continued to improve. In August, corporate bond financing amounted to 271.2 billion yuan, a year-on-year increase of 137.4 billion yuan. Currently, bank loan interest rates remain relatively stable overall, while corporate bond financing rates continue to decline, further expanding the cost advantage of bond financing relative to loans, which continues to drive some corporate financing demand to shift toward the bond market.
Corporate sector credit weakened marginally. In August, short-term corporate loans decreased by 160 billion yuan, a year-on-year increase in the decline of 230 billion yuan. On one hand, this was affected by the high new loan scale in the same period last year and the large volume of loan maturities this year; on the other hand, bill financing turned to a year-on-year increase of 46.9 billion yuan, partially substituting for short-term corporate loans. Newly added medium- and long-term corporate loans in the month were 320 billion yuan, a year-on-year decrease of 150 billion yuan. First, the BCI index fell back below the prosperity threshold in August, indicating a weaker corporate outlook on the future business environment, leading to more cautious financing and investment decisions; second, there was some "cost squeeze" on the price side, with the PMI raw material purchase price rising significantly more than the factory price in August, meaning rising corporate costs were not fully passed downstream, constraining capital expenditure willingness; third, real estate and infrastructure investment remained weak, with January-August real estate development investment and infrastructure investment down 19.9% and 4.0% year-on-year respectively, further widening the decline from January-July. The lack of traditional project investment as a lever for credit expansion makes it difficult to generate large-scale medium- and long-term financing demand.
Household sector credit remained weak. In August, short-term household loans decreased by 121.9 billion yuan, a year-on-year increase in the decline of 132.4 billion yuan. On one hand, employment and income expectations remain weak, and constraints on household consumption willingness have not significantly eased; on the other hand, the overdraft effect of previous trade-in promotions on durable goods consumption continues to show. Medium- and long-term household loans decreased by 82.2 billion yuan in August, a year-on-year increase in the decline of 100.8 billion yuan. The Iceberg 80 Rent Index has been declining since July, and rental yield has also fallen accordingly. On one hand, compared to housing prices, rent more directly reflects real housing demand; on the other hand, with low rental yields, the cost-effectiveness of meeting housing demand through renting remains higher than buying, leading to insufficient household willingness to leverage for home purchases. In August, commodity housing sales in 30 cities weakened again year-on-year. The household sector mainly focused on early loan repayments and actively reducing outstanding debt.
M1 growth slightly rebounded. In August, M1 grew by 4.1% year-on-year, up 0.1 percentage points from the previous month. On one hand, this may be related to the continuous appreciation of the RMB and enterprises accelerating foreign exchange settlement and sales under interest rate hike expectations; on the other hand, fiscal deposits increased 80 billion yuan less year-on-year, with fiscal deposits flowing to government agencies, organizations, households, and enterprises, also supporting M1.
M2 growth slowed. In August, M2 grew by 7.5% year-on-year, down 0.2 percentage points from the previous month. First, weak credit demand and insufficient credit creation by the banking system directly dragged on M2; second, early loan repayments and active deleveraging by enterprises and households also had an impact, with enterprise deposits and household deposits increasing 19.7 billion yuan and 70 billion yuan less year-on-year, respectively; third, amid the global interest rate hike expectations shifting from divergence to hawkishness, some market risk appetite marginally contracted, and non-bank deposits increased 620 billion yuan less year-on-year.
Fiscal and quasi-fiscal efforts are expected to end the one-sided decline in social financing growth. Looking ahead, on one hand, since September, 800 billion yuan of new policy financial instruments have begun to be gradually deployed, with the first batch of funds landing in Zhejiang, Sichuan, Hubei, and other regions. We understand that the subsequent impact of policy financial instruments on social financing may mainly proceed along two paths: first, funds act as project capital to initially drive changes in entrusted loans and other items; second, as projects start, they further stimulate the release of corporate medium- and long-term loans and corporate bond financing demand. On the other hand, nearly 4.9 trillion yuan of government bonds remain to be issued from September to December, 1.4 trillion yuan more than the same period last year, which will provide effective support for social financing in the fourth quarter. Additionally, from a policy signal perspective, a recent article in Qiushi magazine further pointed out that some enterprises are holding cash and hesitating to expand investment and increase employment, emphasizing the need to improve microeconomic expectations, unleash investment and domestic demand potential, enhance development momentum, and stimulate social vitality. All three factors provide positive signals to end the one-sided downward trend in social financing growth.
Risk Warning: Macroeconomic performance below expectations, real estate sales below expectations, U.S. monetary policy exceeding expectations, geopolitical risks exceeding expectations.