Share
BEIJING: Chinese banks extended fewer new loans than expected in May, while broad money supply growth hit a 30-month low, as the government kept its foot on credit brakes in a bid to tame persistent inflation.
Chinese banks lent 551.6 billion yuan (RM257.9 billion) in local currency loans in May, missing market forecasts for 610 billion yuan, the People's Bank of China said on Monday, June 13.
Yuan loans outstanding at the end of May were 17.1% higher than a year ago, the central bank said in a statement on its website (www.pbc.gov.cn).
Annual growth in China's broad M2 measure of money supply slowed to 15.1% in May, the weakest expansion in 30 months, following a rise of 15.3% in April.
The median forecast of economists was for a 15.4% increase in M2 and a 17.1% rise in outstanding loans.
"The lending growth last month was slower than market expectations, showing that tightening measures are biting," said E Yongjian, an analyst at the Bank of Communications in Shanghai.
"But it is still too early to say that the loan demand is declining because of a slowing economy, and we should not read too much into a single month's loan data."
Credit curbs are the centre piece of China's monetary policy aimed at the root cause of inflation, which is still running near 3-year highs.
The central bank has raised banks' required reserves and interest rates. Commercial banks have also been told to scale back lending to the property sector and to financing vehicles run by local governments.
Even so, analysts believe Beijing still faces a tough battle ahead.
There is a growing pool of credit in China that falls outside traditional bank loans, including trust loans and bankers' acceptance bills.
JPMorgan estimates that such alternative forms of credit have reduced the share of bank lending in China's total financing to 59% last year, from 92% in 2002.
Xu Nuojin, the deputy head of the People's Bank of China Guangzhou branch, said in comments published on Monday that inflation could become entrenched because price rises are still driven by too much cash in the economy.
"The current inflation level is achieved through the forceful policy intervention by the government, an all-around rebound is very likely to occur once such administrative measures are relaxed," he said.
China's annual inflation is expected to have edged up to 5.4% in May from 5.3% in April, matching a 32-month high recorded in March. — Reuters
SHARE
