Monday was a good news day for the Chinese economy. Those are rare in 2023, so cherish the moment.

Broad credit provision in August, as reported by the PBoC, was 3.12 trillion yuan, better than expected. New yuan loans were 1.36 trillion, likewise ahead of consensus.

Why does this matter? Well, domestic demand is anemic in China, and that manifested over the summer in a singularly lackluster read on credit growth. July’s figures were the worst since 2009.

A rebound was assured: There’s a seasonal. But the consensus-topping update perhaps suggested sentiment is turning a corner alongside the Party’s piecemeal efforts to revive a moribund credit impulse.

The problem for the PBoC is (or at least was) that if there’s no demand for credit, monetary policy is more or less useless. If households are determined to de-leverage, it doesn’t matter how attractive financing costs are. The same is true for corporates and so on.

The dearth of domestic demand was in part responsible for a brush with consumer price deflation in July. As mentioned here last week, that too abated in August, when CPI rose a “robust” (sorry, I can’t help but chuckle) 0.1% YoY. PPI spent another month in deflation.

Chinese officials have focused on revitalizing mortgage lending, and that looks like it paid dividends in August. Whether it’s sustainable is anybody’s guess. It’s not terribly difficult to engineer a fleeting rebound in something like home loans given that there’s always pent-up demand somewhere — the question is whether there’s enough incremental demand after that one-off boost to keep the momentum alive.

A proxy for mortgages did recover from a July contraction, and borrowing for capex (or other corporate purposes) appears to have nearly tripled. State media thanked… well, the state, naturally, for the recovery. A PBoC publication also indicated the Party is confident that measures adopted so far are sufficient. Any additional stimulus will be targeted.