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New yuan loans rise in May

GROWTH in new loans in China rose again in May although the expansion of M2, the broadest measure of money supply, eased slightly, the central bank said yesterday.

New yuan-backed loans rose to 664.5 billion yuan (US$97.3 billion) last month, an increase from 591.8 billion yuan in April.

Banks in China have extended a combined new yuan credit of 5.84 trillion yuan in the first five months of the year, the People's Bank of China said on its Website yesterday.

But the growth in M2, the broadest measure of money supply, including cash and deposits, eased to 25.7 percent in May from 26 percent in April, the first slowdown since November 2008.

"The surge in bank lending has done what officials had hoped it would do," said Nikhilesh Bhattacharyya, a Moody's associate economist. "Confidence has been boosted and the economy appears to be in a recovery phase."

He said companies seeking to expand "have had few problems accessing financing, while those seeking a liquidity buffer to tide over tough times have also had little trouble accessing one."

China has unveiled economic indicators for May this week, including a rise in retail sales, industrial production, and fixed assets investment. However, the 24.6 percent tumble in exports last month showed that the recovery is still weak without a rebound in external demand.

Lu Zhengwei, Industrial Bank's senior economist, said the new loans figure in May exceeded expectations.

"The new loans will continue to grow quickly, driven mainly by smaller lenders," he said.

Lu said he expects no change in China's monetary policy this year.

China has shifted to an easing monetary policy since November, including lifting lending quotas, cutting interest rates and reserve requirements to encourage lending to bolster the economy.

The growth in total deposits in China has continued to accelerate since late last year, coming in at 26.4 percent year on year in May from 26.2 percent in April.

The growth in yuan deposits also continued its climb to 26.7 percent from 26.2 percent in April.


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