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BEIJING—Bank lending soared last month in China from a two-year low in July, with a large share of the new credit going to people buying new homes, according to central bank data.

The figures released Wednesday by the People's Bank of China confirmed trends in the economy that economists say point to weakness and could be troubling in the months ahead. Much of the lending is going into a housing market that economists have said is showing signs of overheating in some cities, and demand from companies remains anemic.

Over all, Chinese financial institutions issued 948.7 billion yuan ($142.19 billion) of new yuan loans in August, more than double July's 463.6 billion and well above the level expected by economists.

New lending to households reached 675.5 billion yuan last month, a nearly 50% increase from July, according to the data. Of that sum, medium- and long-term household loans, predominantly mortgage lending, stood at 528.6 billion yuan, accounting for more than half of the new loans issued in August. In July, almost all of the new credit was mortgage lending.

Meanwhile, medium- and long-term loans to nonfinancial corporate borrowers dropped 8 billion yuan last month, compared with an increase of 151.4 billion yuan in July, the data showed.

Economists said the outsize mortgage lending and the weak corporate demand continued a pattern of recent months and portrayed an economy that, while growing, may not be doing so in a sustainable way.

"The pattern in new credit over the past few months is unchanged," said Ma Xiaoping, an economist with HSBC Bank. What investment there is outside the property market is mainly being led by the government, said Ms. Ma.

A series of indicators released earlier this month—from factory output to retail sales—showed rebounding economic activity in August largely sustained by government infrastructure spending and property sales.

Ms. Ma and other economists said the latest central bank data showed that credit remains widely available as the government tries to prop up growth in an economy that has been gliding downward in recent years.

"Today's data suggest that loose monetary conditions are still supporting credit growth," said Julian Evans-Pritchard, an economist of Capital Economics. He said the supply of credit was likely to slow in the coming quarters as the central bank tries to rein in financial risks.

Total social financing, a broad measure of credit in the economy that includes nonbank financing, came to 1.47 trillion yuan in August, three times July's level.

Corporate bonds increased to 330.6 billion yuan in August, over 50% more than the tally in July. Economists have said that a sizable portion of that comes from special purpose companies backed by local governments to fund infrastructure and other public projects.

China's broadest measure of money supply, M2, was up 11.4% at the end of August from a year earlier, higher than the 10.2% rise at the end of July.

Another measure, M1, which covers liquid assets such as cash and demand deposits, grew 25.3% year over year in August, compared with a 25.4% pace posted a month earlier.

A surge in M1 in recent months has been interpreted by economists as another sign that companies and individuals would rather hoard cash than spend it as they wait out uncertain economic times.

Liyan Qi

(END) Dow Jones Newswires

September 14, 2016 09:05 ET (13:05 GMT)

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