Chinese banks extended 1.22 trillion yuan ($181 billion) in net new yuan loans in September, well above analysts' expectations. Photo: Reuters

China’s banks extended 1.22 trillion yuan (US$181 billion) in net new yuan loans in September, beating forecasts and representing a jump of 29% from the 948.7 billion yuan in August, according to data from the People’s Bank of China.

Most of the surge in lending came from mortgage loans, which were approximately 55% above the average monthly pace during the first six months of 2016.

Source: China Monetary Policy Report for second quarter of 2016 by People’s Bank of China.

M1, the narrower measure of money supply that tracks only currency in circulation and corporate demand deposits, continued to expand at an elevated pace, gaining 24.7% in September on year. It grew 25.3% on year in August.

There is a clear correlation of M1 money supply and overall home sales, as seen in the chart. This is evidence that PBOC’s loose money policy has had a significant influence on driving real estate sales.

The broader M2 money supply grew 11.5% from a year earlier, the central bank said on Tuesday, in line with forecasts and the 11.4% in August.

Analysts polled by Reuters had expected new lending of 1 trillion yuan and M2 money supply gaining 11.6%.

However, September’s individual home mortgages came in at 475.9 billion, accounting for a large 39 percent of the new loans.

September mortgage loans jumped 76% from the 205.5 billion in the same month last year.

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