Evergrande crisis weighs on China’s credit growth as financing, lending activities cool

China’s credit growth slowed in September, as weakness in the property market amid the Evergrande crisis weighed on financing and lending activities, despite the central bank’s call to stabilise credit expansion.

Aggregate financing was 2.9 trillion yuan (US$449 billion), the People’s Bank of China (PBOC) said on Wednesday. That compares to 2.96 trillion yuan in August and 3.47 trillion yuan in September last year.

The median estimate in a Bloomberg survey of economists was for 3.05 trillion yuan in aggregate financing last month.

Financial institutions offered 1.66 trillion yuan of new loans in the month, up from 1.22 trillion yuan in August. Economists had projected 1.81 trillion yuan.

The slump is mainly a result of tightened financing to the property sector and reduced shadow banking activities related to the industry, according to Zhou Hao, senior emerging markets economist at Commerzbank AG.

China’s major developers saw their sales plunge in September, after home sales in big cities dropped in August, and while Zhou says the weaker growth was “within expectations,” he predicts the PBOC will make a small cut to the benchmark interest rate in October.

The central bank reiterated last month that overall credit growth will become more stable to keep the macro leverage ratio steady, after credit expansion slowed significantly this year in part due to last year’s high base.