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China new loans sharply down in July: central bank
Beijing (AFP) Aug 11, 2009 China's new loans in July dropped to less than a quarter of the level seen a month earlier, the central bank said Tuesday, as banks began to rein in the record lending of the first half. New loans dropped sharply to 355.9 billion yuan (52 billion dollars) last month from 1.53 trillion yuan in June, the People's Bank of China said in a statement. The figure was also down from 381.8 billion yuan in July 2008. The decline met market expectations that banks would slow their lending pace after new loans surged to 7.37 trillion yuan in the first half of the year. Meanwhile China's broad M2 measure of money supply rose by 28.42 percent from a year earlier at the end of July, although that was slightly lower than the 28.5 percent rise at the end of June, the central bank said. Economists said the lending slowdown was unlikely to lead to a credit squeeze because there is already ample liquidity in the economy and Beijing has promised monetary policies that would help maintain economic momentum. "The massive amount of loans extended in the first half have not all been spent yet," said Li Huiyong, chief economist with Shenyin and Wanguo Securities in Shanghai. "There are ample funds to sustain high investment growth even though the lending growth is capped in the second half," he said. The central bank said after the data was released that the lending pace in July, though slower than previous months, is still high by historic standards and helped support the real economy, state media reported. An unnamed central bank official said the lending last month continued to reflect a moderately loose monetary policy meant to "effectively support the development of the real economy." The slowdown in loan growth should not be interpreted as a tighter monetary policy and should actually help calm fears that credit might expand too much, economists argued. "Looking ahead, we expect further normalisation in monetary expansion and investment growth towards a more sustainable level," Hong Kong-based Morgan Stanley economist Wang Qing said in research note. The Chinese economy expanded 7.9 percent in the second quarter after 6.1 percent in the first and economists said the rebound in growth has largely been underpinned by unprecedented new loans. The lending spree has raised concerns that some loans have been funnelled into the stock and property markets for quick profit, rather than helping the real economy. Despite regulators stepping up supervision of bank lending practices, Beijing reaffirmed last week it would stick to policies aimed at boosting growth and would not impose quotas. Share This Article With Planet Earth
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