New yuan loans drop in July
By Feng Jianmin |
August 13, 2011, Saturday
|
Print Edition
Print Edition
NEW yuan lending in July sank to the lowest level this year and money supply growth was the slowest in nearly two years as China's tight monetary policies took effect.
New yuan loans reached 492.6 billion yuan (US$77 billion) in July, down 25.2 billion yuan from a year ago, the People's Bank of China said yesterday.
It was less than the 550 billion yuan median estimate in a Reuters poll and 633.9 billion yuan in June.
M2, the broadest measure of money supply, rose 14.7 percent from a year earlier, down from June's 15.9 percent, the slowest since October 2008. It was also slower than the annual goal of 16 percent set by the central government.
Analysts said the central bank will likely hold off on increasing interest rates or the reserve requirement ratio in the short term due to uncertainties in global markets.
"We expect the central bank will mostly take a 'wait-and-see' approach until overseas markets start to stabilize," said Zhou Hao, an economist with ANZ Bank. "Tightening measures taken in the first half of this year were appropriate, and the effects will ripple for some time."
He estimated that new yuan loans will reach 6.5-7 trillion yuan this year, compared with 7.95 trillion yuan last year.
Analysts said they expect the central bank will rely heavier on open market operations and exchange rates to battle inflation, rather than adjusting interest rates and the reserve requirement.
China's central bank has raised the reserve requirement ratio six times and interest rates three times this year to curb inflation. Consumer prices in July rose 6.5 percent from last year, a 37-month high.
The central bank reiterated yesterday that its priority in the second half will be to tame inflation and carry on with a prudent monetary policy.
E Yongjian, a researcher at the Bank of Communications, said: "The drop in loans this month was due to increases in reserve requirements for banks and limited growth in deposits. Meanwhile, accelerated growth in the amount of commercial papers indicated that demand for loans is decreasing due to a slowdown in some sectors of the economy."
He warned of a possible decline in manufacturing activities and a negative profit outlook for companies as money supply decreases.
"The slow growth of money supply revealed the effect of tightening monetary policies, and market liquidity is still low," he said.
New yuan loans reached 492.6 billion yuan (US$77 billion) in July, down 25.2 billion yuan from a year ago, the People's Bank of China said yesterday.
It was less than the 550 billion yuan median estimate in a Reuters poll and 633.9 billion yuan in June.
M2, the broadest measure of money supply, rose 14.7 percent from a year earlier, down from June's 15.9 percent, the slowest since October 2008. It was also slower than the annual goal of 16 percent set by the central government.
Analysts said the central bank will likely hold off on increasing interest rates or the reserve requirement ratio in the short term due to uncertainties in global markets.
"We expect the central bank will mostly take a 'wait-and-see' approach until overseas markets start to stabilize," said Zhou Hao, an economist with ANZ Bank. "Tightening measures taken in the first half of this year were appropriate, and the effects will ripple for some time."
He estimated that new yuan loans will reach 6.5-7 trillion yuan this year, compared with 7.95 trillion yuan last year.
Analysts said they expect the central bank will rely heavier on open market operations and exchange rates to battle inflation, rather than adjusting interest rates and the reserve requirement.
China's central bank has raised the reserve requirement ratio six times and interest rates three times this year to curb inflation. Consumer prices in July rose 6.5 percent from last year, a 37-month high.
The central bank reiterated yesterday that its priority in the second half will be to tame inflation and carry on with a prudent monetary policy.
E Yongjian, a researcher at the Bank of Communications, said: "The drop in loans this month was due to increases in reserve requirements for banks and limited growth in deposits. Meanwhile, accelerated growth in the amount of commercial papers indicated that demand for loans is decreasing due to a slowdown in some sectors of the economy."
He warned of a possible decline in manufacturing activities and a negative profit outlook for companies as money supply decreases.
"The slow growth of money supply revealed the effect of tightening monetary policies, and market liquidity is still low," he said.
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