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Home >> Business
UPDATED: 08:20, June 15, 2006
China sees surge in bank lending to fuel overheated investment
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Chinese banks extended 209.4 billion yuan (26.1 billion U.S. dollars) worth of local currency loans in May alone, nearly double that of the same month last year, the central bank reported Wednesday, showing an investment binge might be far from being curbed.

The outstanding loans totaled 2.12 trillion yuan by the end of May, surging 16 percent year on year and closing in on the central bank's annual target of 2.5 trillion yuan, the People's Bank of China said.

Broad money supply jumped 19.1 percent in May.

China's central government has sought to discourage excessive investments in real estate and other construction projects, ordering local officials to reduce land supplies, and banks to cut back on lending.

On April 28, the central bank raised the minimum rate commercial banks charge on one-year loans in local currency, by 27 basis points, to 5.85 percent in a further move to rein in lending. It was the first increase since October 2004.

But the new figures show that the efforts might not be working very well, analysts acknowledge.

Zhou Xiaochuan, China's central bank chief, told a seminar in Beijing earlier this month that another rise of interest rates was not on the agenda.

At that time, he said as financial data for May were not yet available, it was not known whether the April loan rate hike had had its desired effect.

Despite the signs of an overheating Chinese economy, official figures released Monday showed China's main gauge for inflation, the consumer price index, remained low, rising 1.4 percent from a year earlier, up from a 1.2 percent year-on-year increase in April.

The index rose 1.2 percent in the January-May period from a year earlier, suggesting that the government could meet its target of keeping inflation within 2 percent this year.

Source: Xinhua

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