In August, the "relocation of deposits" accelerates.

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Bank deposits in August showed signs of accelerating transfers, with the stock market rebound further driving deposits to move. There was a seesaw effect between non-bank deposits and household deposits: non-bank deposits increased by 1.18 trillion yuan in August, 550 billion yuan more year-on-year, and the M1-M2 scissors difference in August was -2.8% (compared to 3.2% in July).

How should we view deposit transfers going forward? Previously, we published three reports on the "household deposits transfer series," addressing market concerns about: 1) the size of excess household savings, 2) driving factors for deposit transfers, and 3) high-frequency tracking indicators of deposit transfer. According to our forecasts, from 2020 to July 2025 (latest data), excess household savings fell to 3.57 trillion yuan (previously 4.25 trillion). Amid declining deposit attractiveness, unresolved asset scarcity, and capital market activation policies, the capital market may become the main spill-over direction. In this process, the "information leverage" may act as an amplifier, boosting household funds' entry into the market when a bull market starts, further enhancing the sustainability of the rally. Currently, household deposit transfer remains in its early stages; July showed the feature of deposit "non-banking," which was further strengthened in August. Yet, we also note that "information leverage" could strengthen a bull market. If household deposit transfer accelerates significantly, there is a need to be alert to tail risks from market overheating.

New credit in August: 590 billion yuan, in line with our expectations

New RMB loans in August totaled 590 billion yuan, 310 billion less year-on-year, and the outstanding loan growth rate decreased by 0.1 percentage point to 6.8%. Structurally, both household and corporate loans decreased year-on-year, while non-bank loans increased year-on-year.

1）For households, new loans in August increased by 30.3 billion yuan, a year-on-year decline of 159.7 billion, with both short- and medium-to-long-term loans decreasing. Specifically, short-term household loans increased by 10.5 billion yuan, down 61.1 billion year-on-year; medium-to-long-term loans increased by 20 billion, down 100 billion year-on-year.

For short-term loans, weaker income expectations and ongoing employment pressure led to sluggish consumer confidence, which hasn't fundamentally improved; combined with low inflation leading to relatively high real interest rates, this curbs households' willingness to leverage, holding back short-term loan expansion. Personal consumption loan subsidy policies rolled out since August should help restore demand, but policy transmission to the loan end will be delayed. Going forward, household short-term loan growth will remain closely tied to the implementation of consumption-promotion policies and improvement in expectations.

For medium-to-long-term loans, August's real estate sales off-season dragged on demand. Data from CRIC show that the TOP100 property developers recorded sales of 207.04 billion yuan in August 2025, down 1.9% month-on-month and 17.6% year-on-year, with single-month performance staying at historic lows. We highlight that China's current economic recovery is weak, industrial stabilization policies continue, value-added for the tertiary sector is volatile, and demand-side factors such as consumption, infrastructure, and real estate investment remain pressured. Export uncertainties persist, and endogenous demand for funds has yet to recover.

2）For corporates, loans to enterprises and institutions increased by 590 billion yuan in August, down 250 billion year-on-year. Of this, short-term loans increased by 70 billion yuan, up 260 billion year-on-year; medium-to-long-term loans increased by 470 billion, down 20 billion year-on-year; and bill financing rose 53.1 billion, down 492 billion year-on-year.

Bill financing dropped significantly, as bill discount rates rose at end-August, the spread between bill and NCD rates narrowed, and banks' incentives to use bills for volume faded.

Short-term loans rose more; after bill declines, liquidity needs for procurement or settlements shifted to short-term working capital loans. Banks, facing net interest margin pressure and lower risk appetite, preferred to issue shorter-duration loans.

Medium-to-long-term loans fell as weak demand constrained corporate expansion. Manufacturing PMI in August was 49.4%, below the boom/bust line for five consecutive months; domestic demand remains sluggish. Additionally, the marginal boost from foreign demand weakened due to the US-China trade war, curbing corporate expansion. Furthermore, local government debt refinancing continued to weigh, with 54.8 billion yuan in special refinancing bonds issued for debt swaps in August. Real estate sales also remained weak, and plummeting medium-to-long-term household loans further suppressed capital demand from property developers and related supply chains.

However, we note that the drag from local government debt swaps is expected to ease. In August, special refinancing bonds for debt swaps totaled 54.8 billion yuan nationwide, down 31 billion month-on-month. The National People’s Congress Standing Committee announced a new annual local government debt quota of 2 trillion yuan (special refinancing bonds) for 2024-2026. By end-August, 1.84 trillion yuan had been issued (about 91.9% of target). Looking ahead, new bond issuance is entering its mid-to-late stages, so negative effects on loan data should gradually lessen.

3）For non-banks, loans decreased by 113 billion yuan in August, a year-on-year increase of 22.5 billion, turning positive again. As the equity market continued to rebound in August, the "wealth effect" siphoned capital into the stock market, supporting non-bank data. Continued attention should be paid to policy effectiveness and changes in capital market activity, with non-bank loan recovery expected to persist.

In the long run, slowing credit growth reflects the economic structural transformation and a "shift in gears" for credit demand, as well as healthy substitution by direct financing. In the future, to reasonably assess financial support, greater focus may be on the effect of falling interest rates, presenting a new feature of "government leveraging up, corporate stable leverage, households moderately deleveraging." Structurally, emphasis is placed on supporting the "five major articles" and areas related to them; future evaluations should focus more on the effects of lower rates and the strength of financial support for key sectors such as tech innovation, consumption, green initiatives, and inclusive finance.

Social financing increased by 2.57 trillion yuan in August, with government bonds as the main drag

Social financing (TSF) rose by 2.57 trillion yuan in August, down 463 billion year-on-year, with end-month growth at 8.8%, falling by 0.2 percentage points from July. The largest positive contribution came from undiscounted bankers’ acceptances, while the main drags were RMB loans and government bonds. Other items fluctuated little compared to last year, in line with our forecasts.

1) Support driver: undiscounted bankers’ acceptances

In August, undiscounted bankers’ acceptances increased by 197.4 billion yuan, up 132.3 billion year-on-year, and were the largest contributor to the incremental structure. As noted above, end-August saw a sharp rise in bill interest rates, prompting businesses to keep bills rather than discount them with banks, reducing on-balance-sheet bill financing and increasing the balance of undiscounted bills—an on-balance sheet/off-balance sheet “seesaw” effect.

2) Drag: new RMB loans and government bonds

For RMB loans, they increased by 623.3 billion yuan in August, 417.8 billion less year-on-year, becoming a main drag and consistent with the overall downward loan trend though the decline exceeded the credit-caliber drop. In detail, the main difference between TSF-caliber credit and RMB loans is that TSF excludes loans to non-bank and foreign institutions, focusing on the real economy. Since July, the equity market rally and wealth effects led to a recovery in total financing, boosting non-bank loans. Thus, excluding non-bank and cross-border RMB loans, TSF-caliber RMB loan increments weakened further.

For government bonds, they increased by 1.37 trillion yuan in August, down 251.9 billion year-on-year, as local government bond supply slowed in the second half. After August, the peaks of local government special bond and ultra-long-term sovereign bond issuance passed; if new fiscal stimulus is absent in Q4, government bonds may shift from a supportive factor in H1 to a drag in H2, weighing on TSF data in Q4.

3) Other items remained stable: FX loans fell by 9 billion in August, 52.2 billion less than last year; entrusted loans fell by 16.6 billion, down 19.1 billion year-on-year; trust loans increased by 35 billion, up 13.4 billion year-on-year; non-financial domestic equity financing rose by 45.7 billion, up 32.5 billion year-on-year.

M1-M2 scissors difference continued to narrow, deposits further “non-banked”

At end-August, M2 growth was 8.8%, unchanged from last month. Structurally, except for increased non-bank deposits, household, corporate, and fiscal deposits all fell year-on-year. Meanwhile, M1 growth was 6%, up 0.4 percentage points from last month's 5.6%.

Specifically, RMB deposits rose by 2.06 trillion yuan in August, down 160 billion year-on-year: household deposits up 110 billion (down 600 billion y/y); non-financial corporate deposits up 299.7 billion (down 50.3 billion y/y); fiscal deposits up 190 billion (down 368.7 billion y/y); and non-bank deposits up 1.18 trillion (up 550 billion y/y).

The M1-M2 scissors difference in August was -2.8%, 0.4 percentage points narrower than last month, reflecting increased liquidity as households or corporates switched time deposits to demand deposits for consumption or investment.

Structurally, for non-bank, corporate, and household deposits, in our July financial data review we first mentioned “deposit non-banking,” and this view continues to play out. Currently, market recovery and falling rates are jointly driving deposit transfers, boosting non-bank deposits and creating a seesaw between household/corporate deposits and non-bank deposits. From Jan to Aug, non-bank deposits increased by 5.87 trillion, 2.28 trillion more than last year. In August, this trend continued and intensified. In addition, an active stock market with high trading volumes also increased securities firms' margin deposits, supporting non-bank deposits.

For fiscal deposits, the main reason for reduced increment is the mismatch in the government bond issuance schedule—smaller net financing in August compared to last year led to reduced fiscal deposits.

At end-August, M0 growth was 11.7%, down 0.1 ppts from 11.8% prior. The level is still relatively high, reflecting structural imbalances in economic recovery, with the economy improving less in lower-tier cities and rural areas, boosting cash demand. Returning migrant workers also added to cash in circulation.

Monetary policy emphasizes balancing financial stability and economic support; further RRR and interest rate cuts possible by year-end

For monetary policy going forward, the PBOC again mentioned in its Q2 monetary policy report the need to "guard against arbitrage, and balance financial support for the real economy with maintaining financial health." We believe that while the central bank re-emphasized anti-arbitrage, the focus is on balancing financial stability with real economic development, not tightening monetary policy. The expected deleveraging will be relatively moderate, using open market operations, interest rate signals, and other gradual tools to guide financial institutions to proactively deleverage, thus avoiding sharply higher rates or abrupt liquidity squeezes that could trigger systemic risk, financial instability, and inability to support the real economy.

We believe external shocks will remain uncertain in the second half, while domestic effective demand remains insufficient and supply-side competition remains overly fierce. As the PBOC highlighted, "external conditions are becoming more complex and severe… China's economy still faces many risks and challenges," so moderately loose monetary policy is needed to offset economic downside and external uncertainty. For the whole year, we expect 2025 monetary policy to remain accommodative and work synergistically with fiscal, industrial, employment, and social security policies. We anticipate one more 50bp RRR cut and a 20bp interest rate cut by year-end. However, we also note that price recovery will not be instantaneous—it will be a slow process, requiring coordination across departments.

Author: Li Chao, Fei Jin of Zheshang Securities. Source: Li Chao Macroeconomic Research and Asset Allocation, original title: "Deposit ‘Non-Banking’ Accelerates; What Next for Transfers?"

Risk disclosure and disclaimerThe market carries risks; investment must be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Investing accordingly is at your own risk. ```