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September 12, 2015

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August new yuan lending declines

CHINA’S bank lending retreated in August, the central bank said yesterday, after a sharp rise in July when the government directed funds into the stock market.

Newly extended yuan loans fell to 809.6 billion yuan (US$127 billion) after surging to a six-year high of 1.48 trillion yuan in July on government measures to rescue a stock market rout.

Monthly aggregate financing rose to 1.08 trillion yuan from 718.8 billion yuan in July, the People’s Bank of China said.

Meanwhile, M2 money supply gained 13.3 percent from a year earlier, in line with the figure in July.

The growth of M2 and aggregate financing gave policy-makers a slight relief as factory prices deflated to the worst level since 2009, experts said. The industrial sector is still suffering from higher interest rates on lending and new yuan loans underperformed amid weak demand, they added.

“The increase of new credit might relate to a faster pace of government expenditure on infrastructure projects,” said Li Qilin, an analyst with Minsheng Securities Co.

“But medium and long-term loans to enterprises underperformed last month and are facing downside pressure in the next month,” Li added.

The PBOC has cut interest rates five times since November and lowered the amount of funds banks have to set as reserves as the central bank aims to boost lending from lenders and halt a further slowdown.

“Higher economic growth and inflation numbers could help alleviate the current hard landing and deflation fears,” Larry Hu, head of China economics at Macquarie Securities, wrote in a report ahead of the data. “That said, the underlying economy remains weak and therefore the policy stance would stay accommodative.”


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