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Lending to inch up but rate hikes uncertain
By Zhang Fengming |
August 3, 2010, Tuesday
|
Online Edition
Online Edition
Economists said new credit in July is expected pick up but they're divided on interest rates increases.
New credit in July is expected to rose to 650 billion yuan (US$97 billion), Lu Zhengwei, an Industrial Bank economist, said.
Media reports run today that the data could be around 700 billion yuan.
Banks in China extended 603.4 billion yuan of new yuan loans in June, down from May's 639.4 billion. The official July monetary data are available around August 11.
"Some economic indicators are showing that China's growth is slowing down its momentum with a weak external demand," said Lu. "Against the backdrop, we think it's unlikely to see any interest rates hike this year."
China's manufacturing sector contracted last month for the first time since May last year, an HSBC survey showed on Monday.
The HSBC China Manufacturing Purchasing Managers' Index, a comprehensive indicator of industrial activity, softened to 49.4 in July from 50.4 in June, dropping before 50, the watershed of expansion and contraction.
Market speculation were mounting earlier this year that China may raise its interest rates in the second half of this year to cool off economic activities.
Now, with the economic growth taming and private indicators showing possible industrial contraction, economists like Lu are putting down such expectation.
But some said further tightening is still needed to ward off possible inflation increase.
Sebastien Barbe, a Credit Agricole economist, said interest rate hikes are likely in the third quarter, especially if inflation speeds up.
The bank said twice interest rates are likely this year, 27 basis points, or 0.27 percentage points each.
China has kept its interest rates untouched since 2009.
China has targeted a money supply growth of 17 percent this year and a whole-year new credit of 7.5 trillion yuan.
China kept its appropriately loose monetary policy in the second half with tough hands on certain areas such as the high-polluting industries or real estate sector.
Banks in China issued a record 9.6 trillion yuan of new credit in 2009 amid a stimulus package against the global financial crisis.
New credit in July is expected to rose to 650 billion yuan (US$97 billion), Lu Zhengwei, an Industrial Bank economist, said.
Media reports run today that the data could be around 700 billion yuan.
Banks in China extended 603.4 billion yuan of new yuan loans in June, down from May's 639.4 billion. The official July monetary data are available around August 11.
"Some economic indicators are showing that China's growth is slowing down its momentum with a weak external demand," said Lu. "Against the backdrop, we think it's unlikely to see any interest rates hike this year."
China's manufacturing sector contracted last month for the first time since May last year, an HSBC survey showed on Monday.
The HSBC China Manufacturing Purchasing Managers' Index, a comprehensive indicator of industrial activity, softened to 49.4 in July from 50.4 in June, dropping before 50, the watershed of expansion and contraction.
Market speculation were mounting earlier this year that China may raise its interest rates in the second half of this year to cool off economic activities.
Now, with the economic growth taming and private indicators showing possible industrial contraction, economists like Lu are putting down such expectation.
But some said further tightening is still needed to ward off possible inflation increase.
Sebastien Barbe, a Credit Agricole economist, said interest rate hikes are likely in the third quarter, especially if inflation speeds up.
The bank said twice interest rates are likely this year, 27 basis points, or 0.27 percentage points each.
China has kept its interest rates untouched since 2009.
China has targeted a money supply growth of 17 percent this year and a whole-year new credit of 7.5 trillion yuan.
China kept its appropriately loose monetary policy in the second half with tough hands on certain areas such as the high-polluting industries or real estate sector.
Banks in China issued a record 9.6 trillion yuan of new credit in 2009 amid a stimulus package against the global financial crisis.
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