China Sept new loans surge to 1.05t yuan, beating forecasts

[BEIJING] Chinese banks extended 1.05 trillion yuan (US$165.47 billion) in new yuan loans in September, more than markets had expected, following moves by the central bank to ease monetary policy and efforts to fast track infrastructure projects to support growth.

Economists polled by Reuters had forecast new yuan loans would rise to 885.5 billion yuan in September from 809.6 billion yuan in August.

The central bank said broad M2 money supply grew 13.1 per cent from a year earlier, the People's Bank of China said in a statement on its website.

Outstanding loan growth was 15.4 per cent in September.

Analysts polled by Reuters had expected outstanding loans to rise by 15.3 per cent and predicted money supply would rise by 13.2 per cent.

In a bid to stoke activity, the central bank has cut lending rates five times since November, and lowered the amount of cash that the biggest banks must hold as reserves. The latest cut in interest rates and banks' reserve requirements came on August 25. "While this points to better financing conditions in the economy, it must be remembered that monetary statistics have always came out with encouraging numbers after an easing move but remain dispirited thereafter - which is a clear indication that there are ongoing problems on the demand side, rather than the supply side," said Chester Liaw, an economist at Forecast Pte Ltd in Singapore.

China's total social financing (TSF), a broad measure of overall liquidity in the economy, rose to 1.30 trillion yuan (US$204.88 billion) in September from 1.08 trillion yuan in August, the central bank said.

Weighed down by a cooling property market, widespread factory overcapacity and high local debt levels, China is expected to report its slowest economic growth in a quarter of a century this year.

A summer stock market crash and a surprise devaluation of the yuan in August sent tremors through global markets, raising concerns both inside and outside of China about Beijing's ability to manage its economy.

China has increased efforts to support the economy in recent months, ranging from fast-tracking infrastructure investment to cutting downpayments for some first-time home buyers and pushing ahead with financial reforms.

China's economic planner said it approved 218 fixed-asset projects worth 1.81 trillion yuan (US$285.3 billion) in the first nine months of the year, as Beijing looks to drive infrastructure investment to support slowing economic growth.

The authorities are expected to loosen monetary policy further in coming months, but questions surround its effectiveness, partly because it has encouraged investors to move more money out of China.

REUTERS