15 October 2009 07:45 [Source: ICIS news]
By Fanny Zhang
GUANGZHOU (ICIS news)--?xml:namespace>
In September, Chinese banks extended yuan (CNY) 516.7bn ($75.65bn) in new loans, representing a 37.9% year-on-year increase and a 26% jump from August 2009, based on official data from the Peoples’ Bank of China.
“September’s new loan far exceeded market expectation, which is some CNY400bn. The high figure matches the strengthening in investment and demand,” said Liu Qiyuan, an economist at China Merchant Securities.
Total lending in the first three quarters ballooned 149% year on year to CNY8,670bn, based on central bank data.
China has maintained a loose credit-access policy since the start of the year, in line with its CNY4,000bn fiscal stimulus package introduced in late 2008 to ensure that the pace of its economic growth would not significantly slow amid the global recession.
The Chinese government is targeting an 8% GDP growth this year, one percentage point lower than the 9% growth recorded in 2008.
On the strength of the fiscal stimulus package, demand from China – a major importer of petrochemicals in Asia – almost single-handedly boosted regional product prices early this year.
Meanwhile, official data showed that
The government is expected to keep its relatively loose money policy in the fourth quarter to ensure continuity in the recovery pace, analysts said.
Liu at China Merchant Securities estimated that average new lending would still be a high CNY400bn in the last three months of the year.
There is no reason to fear inflation despite the credit boom that China can afford to keep a loose monetary policy, said Liu
“Both demand and the overall economy are in the below-potential territory. Inflation wouldn’t come early, at least [not] before the middle of next year,” Liu said.
“Exchange rate is a bigger concern. Hiking interest rate would fuel inflow of hot money,” Liu said, adding that this could lead to a stronger yuan that would be “detrimental to [China's] already fragile exports”.
Exports have declined for the 11th month in September, falling 15.2% year on year to $115.93bn (€77.67bn), based on official data released on 14 October.
($1 = CNY6.83/$1 = €0.67)
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