Fewer loans but liquidity enough

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BANKS in China lent less than expected in February but still market liquidity remained sufficient due to increasing direct fund-raising.

The People's Bank of China is keeping a relatively easy policy to support economic growth, said analysts, adding that inflation may accelerate in coming months.

China's new yuan lending totaled 620 billion yuan (US$99.52 billion) in February, down from a three-year high of 1.07 trillion yuan in January and 710.7 billion yuan last February, the PBOC said yesterday.

A Bloomberg News survey of 28 economists estimated that February loans fell below the median 700 billion yuan.

However, total social financing - an indicator of overall liquidity which includes funds raised through bank loans, corporate bonds, equity financing, foreign direct investment, bankers' acceptances, direct company lending and external debt - was 1.07 trillion yuan in February, up 22.8 billion yuan the same month last year.

"Considering that February had five fewer working days than last year due to the week-long Chinese New Year's holiday, lending wasn't really low," said Li Zhiqiang, an analyst at China Minsheng Bank said. "The size of total social financing also reflects the financial sector's strong support for economic growth."

He said the PBOC is not likely to tighten monetary policies in the near term despite rising inflation, which hit a 10-month high of 3.2 percent in February.

Lian Ping, chief economist of the Bank of Communications, said he expects yuan lending to "significantly rebound" this month.

M2, the broadest measure of money supply, expanded 15.2 percent annually in February, 0.7 percentage point lower than January but 2.2 percentage points faster than February a year ago, the central bank said.

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