China’s M2 money supply grew by 8.8% year-on-year in August 2025. This matches previous figures and slightly beats the expected 8.7%. This growth shows an increase in the money available in the Chinese economy. In August, new yuan loans totaled ¥590.0 billion, falling short of the ¥800.0 billion forecast. This is an improvement compared to the previous month’s negative ¥50.0 billion. To stimulate domestic spending and boost demand, Beijing plans to introduce subsidies to create trillions in new loans.

Weak Credit Demand

The loan data for August is disappointing, showing that demand for credit remains slow, despite stability in the money supply. This situation is likely to put pressure on Chinese stocks and industrial commodities, such as copper. We remain cautious about the short-term outlook for assets tied to China. This trend is not new; similar weaknesses were evident throughout 2023 and 2024, especially in the struggling property sector. For instance, official data indicated that property investment dropped more than 9% in 2024, a decline that has proven hard to reverse. This ongoing weakness suggests that any recovery could be fragile and face setbacks. However, the main point to note is the expected government stimulus, which could lead to significant market changes in the coming weeks. The uncertainty surrounding weak current data alongside possible future support is likely to increase volatility. We believe that buying options strategies, such as straddles on the Hang Seng Tech Index, could be a smart way to profit from potential price swings.

Immediate Term Strategy

In the short term, weak credit numbers suggest that puts on iron ore futures or currencies tied to commodities, like the Australian dollar, could be effective. On the other hand, any solid news about stimulus could lead to a significant rally, making longer-dated call options on major Chinese tech stocks appealing for those expecting a rebound. Timing the government’s announcement is now the most important factor for our trading desks. Create your live VT Markets account and start trading now.

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