CHINA’S credit demand improved, deflationary pressures eased and the yuan rallied, adding to a recent trickle of signs that the economy and financial markets may be stabilizing after a downturn.

The strong credit data published Monday showed recent steps to bolster the real estate market may be starting to lift household demand for mortgages, while corporate loans also picked up. The yuan gained Monday after the central bank escalated its defense of the currency.

Those add to the encouraging signs from the weekend, with consumer prices returning to gains after a drop in July — albeit by the slimmest of margins. Factory-gate deflation also narrowed.

“The policy measures helped the economy to stabilize,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. “The key question is to what extent the economic momentum can be sustained.”

China’s economy is trying to regain traction as a property slump and weak confidence drag on its recovery.

The improvement in the August data suggests July’s figures, which showed consumer prices tipping into deflation and monthly loans plunging to a 14-year low, may have been the worst of the slump.

The government’s supportive efforts, including cuts to policy loan rates, mortgage rates and down-payment requirements for home purchases, are likely helping the recovery.

Goldman Sachs Group Inc. economists estimate the policy measures announced so far had a total impact equal to about 60 basis points, or 0.6%, of gross domestic product.

Now, the question is whether China’s property sector is capable of definitively turning a corner and lifting overall confidence in the economy.

“August’s stronger-than-expected credit suggests China’s monetary and fiscal stimulus may be starting to gain traction. But declines in long-term borrowing by business and households show private-sector demand has yet to rebound, despite signs of bottoming in purchasing managers surveys and trade,” said Eric Zhu, economist at Bloomberg Economics. (SD-Agencies)