China’s new lending in July falls sharply, further easing expected

China’s new lending in July falls sharply, further easing expected
# 11 August 2012 08:45 (UTC +04:00)
Baku – APA-Economics. China’s new yuan-denominated lending in July declined sharply to 540.1 billion yuan (about 85.19 billion U.S. dollars), the lowest since September 2011, the People’s Bank of China (PBOC), the central bank, announced Friday, Xinhua reported.

This compares to new loans of 919.8 billion yuan in June, which hit a three-month high after reaching 1.01 trillion yuan in March.

M2, a broad measure of the money supply that covers cash in circulation and all deposits, increased 13.9 percent year on year to 91.91 trillion yuan at the end of July, up 0.3 percentage point from the end of June but lower than the 14-percent annual target set by the government for 2012.

Preliminary data showed that social financing, a measure of funds raised by entities in the real economy, totaled 8.82 trillion yuan in the first seven months, up 514.3 billion yuan from the same period in 2011, said the PBOC.

Despite being much lower than market expectations, the deceleration in lending growth in July does not necessarily suggest a tightening of the money supply, economists said.

The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, rose 4.6 percent year on year to 28.31 trillion yuan at the end of July.

The latest data from the National Bureau of Statistics (NBS) showed that China’s industrial value-added output expanded 9.2 percent year on year in July, 0.3 percentage point lower than June’s 9.5 percent and the slowest growth since May 2009.

Meanwhile, China’s urban fixed asset investment rose 20.4 percent year on year to 18.43 trillion yuan in the first seven months of 2012. The growth rate stayed flat with that in the first half of the year, the NBS data showed.

In a bid to bolster the economy, the central bank cut benchmark interest rates twice in May and June, separately. It had previously lowered the reserve requirement ratio three times before the rate cut.

Economists said the sharp decrease in July lending could have prompted further credit easing, especially when domestic consumer inflation eased to its lowest rate in two and a half years in July.