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Wan LixinOpinion deputy editor of Shanghai Daily
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New bank lending slows after stimulus-led massive growth
By Elaine Kurtenbach |
May 6, 2009, Wednesday
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Print Edition
Print Edition
CHINA'S new bank lending last month was likely more than 600 billion yuan (US$87.8 billion), sharply lower than the record trillion-plus yuan loans in earlier months this year, a Chinese newspaper said yesterday, citing unnamed industry figures.
China's banks ramped up lending early this year with government encouragement as the country fought to revive flagging economic growth. New loans in March totaled 1.9 trillion yuan (US$220 billion), with new lending for the first quarter totaling 4.58 trillion yuan.
Lending moderated last month to above 600 billion yuan and is likely to remain at a similar level this and next month, the China Securities Journal said. Such reports often match later official data announcements.
The plentiful supply of credit accompanying a 4 trillion yuan government stimulus package has helped reinforce expectations that China's economy is already recovering from the worst of the slump that hit late last year as demand for exports plunged.
It is also typical of lending patterns in China, where credit often peaks early in the year and then tapers off as the government exerts control.
But it has also raised concern over the hazards of wasteful investment and bad debt, given China's still relatively weak economic activity.
"Clearly, new lending in the rest of the year at the same pace - or half as fast - as in the first quarter would be unthinkable and too fast," UBS economist Tao Wang said in a report issued last week.
Apart from the risk of spurring inflation by pumping too much money into the economy, "growth may not be sustainable if demand is mainly driven by the government and easy credit, and the risk of massive resource misallocation rises," she said.
One worry is that excess investment in some industries could lead to gluts and overcapacity, further depressing corporate profits, said Sherman Chan, an economist at Moody's Economy.com.
While recent surveys suggest a mild rebound in export and domestic industrial demand, China's 6.1-percent growth in the first quarter fell short of its 8-percent goal for the year.
China's banks ramped up lending early this year with government encouragement as the country fought to revive flagging economic growth. New loans in March totaled 1.9 trillion yuan (US$220 billion), with new lending for the first quarter totaling 4.58 trillion yuan.
Lending moderated last month to above 600 billion yuan and is likely to remain at a similar level this and next month, the China Securities Journal said. Such reports often match later official data announcements.
The plentiful supply of credit accompanying a 4 trillion yuan government stimulus package has helped reinforce expectations that China's economy is already recovering from the worst of the slump that hit late last year as demand for exports plunged.
It is also typical of lending patterns in China, where credit often peaks early in the year and then tapers off as the government exerts control.
But it has also raised concern over the hazards of wasteful investment and bad debt, given China's still relatively weak economic activity.
"Clearly, new lending in the rest of the year at the same pace - or half as fast - as in the first quarter would be unthinkable and too fast," UBS economist Tao Wang said in a report issued last week.
Apart from the risk of spurring inflation by pumping too much money into the economy, "growth may not be sustainable if demand is mainly driven by the government and easy credit, and the risk of massive resource misallocation rises," she said.
One worry is that excess investment in some industries could lead to gluts and overcapacity, further depressing corporate profits, said Sherman Chan, an economist at Moody's Economy.com.
While recent surveys suggest a mild rebound in export and domestic industrial demand, China's 6.1-percent growth in the first quarter fell short of its 8-percent goal for the year.
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