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Fear of squeeze spurs new loans to 1.04t yuan in January
By Zhang Fengming |
February 15, 2011, Tuesday
|
Online Edition
Online Edition
BANKS in China extended 1.04 trillion yuan (US$158 billion) of new yuan loans in January as lenders front-loaded loans in fear of further tightening.
M2, the broadest measure of money supply, rose 17.2 percent last month from a year earlier, the People's Bank of China said on its website yesterday. The January M2 was slower than December's 19.7 percent growth.
The loan figure was less than previously speculated 1.2 trillion yuan but still grew briskly considering China's whole year credit target of 7 trillion yuan in 2011.
China shifted its monetary policy from relatively loose to prudent this year to tame inflation and ward off assets price bubbles.
The central bank has already raised interest rates three times since October. The reserve requirement ratio has increased seven times since 2010 (six times last year and once in January) to lock up liquidity.
Against the backdrop, banks tend to issue credit in the beginning of the year in fear of further tightening.
Economists said bank lending may slow down this month due to the Spring Festival holiday and tighter control from authorities.
Confronting a shortage of credit, the Industrial and Commercial Bank of China is leading the industry in withholding interest rate discounts to first-home buyers.
"Limited credit quota" was often quoted by credit officers to home buyers this month from authorities on lending control.
Deutsche Bank said it expected China's lending growth to slow down to 16 percent from last year's 19.9 percent. The growth of M2 is expected to scale back to 16.5 percent from 2010's 19.7 percent.
Banks in China extended 7.95 trillion yuan of yuan-denominated loans last year, beyond the official target of 7.5 trillion yuan.
"The central bank will need to be vigilant in managing inflation expectations," said Liu Ligang, an ANZ economist. "We think another reserve requirement hike is possible before the National People's Congress in early March."
Also yesterday, China posted a 4.9 percent rise in January consumer price index after it shifted to a new index calculation by cutting the weight of food in the CPI basket.
The CPI basket is reviewed every five years based on household survey, and changes are introduced to reflect new spending pattern.
"China's inflation eased on adjusted basket," Liu said. "The release has not changed our outlook on inflation. In fact, underlying inflationary pressures have continued to strengthen."
The view is echoed by Citigroup economists.
"Owing to pressures from food and international commodity prices, wage increases, and pass-through from producer prices, we continue to think the official CPI target of 4 percent will be missed," Citigroup said in a research note.
The US bank expect three more interest rates increases this year, two in the first half and one in the second half.
The one-year benchmark lending rate now stands at 6.06 percent after 75 basis points increase, while the one-year savings rate is 3 percent.
M2, the broadest measure of money supply, rose 17.2 percent last month from a year earlier, the People's Bank of China said on its website yesterday. The January M2 was slower than December's 19.7 percent growth.
The loan figure was less than previously speculated 1.2 trillion yuan but still grew briskly considering China's whole year credit target of 7 trillion yuan in 2011.
China shifted its monetary policy from relatively loose to prudent this year to tame inflation and ward off assets price bubbles.
The central bank has already raised interest rates three times since October. The reserve requirement ratio has increased seven times since 2010 (six times last year and once in January) to lock up liquidity.
Against the backdrop, banks tend to issue credit in the beginning of the year in fear of further tightening.
Economists said bank lending may slow down this month due to the Spring Festival holiday and tighter control from authorities.
Confronting a shortage of credit, the Industrial and Commercial Bank of China is leading the industry in withholding interest rate discounts to first-home buyers.
"Limited credit quota" was often quoted by credit officers to home buyers this month from authorities on lending control.
Deutsche Bank said it expected China's lending growth to slow down to 16 percent from last year's 19.9 percent. The growth of M2 is expected to scale back to 16.5 percent from 2010's 19.7 percent.
Banks in China extended 7.95 trillion yuan of yuan-denominated loans last year, beyond the official target of 7.5 trillion yuan.
"The central bank will need to be vigilant in managing inflation expectations," said Liu Ligang, an ANZ economist. "We think another reserve requirement hike is possible before the National People's Congress in early March."
Also yesterday, China posted a 4.9 percent rise in January consumer price index after it shifted to a new index calculation by cutting the weight of food in the CPI basket.
The CPI basket is reviewed every five years based on household survey, and changes are introduced to reflect new spending pattern.
"China's inflation eased on adjusted basket," Liu said. "The release has not changed our outlook on inflation. In fact, underlying inflationary pressures have continued to strengthen."
The view is echoed by Citigroup economists.
"Owing to pressures from food and international commodity prices, wage increases, and pass-through from producer prices, we continue to think the official CPI target of 4 percent will be missed," Citigroup said in a research note.
The US bank expect three more interest rates increases this year, two in the first half and one in the second half.
The one-year benchmark lending rate now stands at 6.06 percent after 75 basis points increase, while the one-year savings rate is 3 percent.
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