Beating expectations, yuan loans see gains

09:35, May 12, 2010      

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Yuan loans posted a higher-than-expected growth in April on a rise seen in medium and long-term (MLT) mortgage lending and bill financing.

New yuan loans reached 774 billion yuan ($113.33 billion) in April, 182.2 billion yuan ($26.68 billion) higher than the same period last year, the People's Bank of China said Tuesday in a report on its website. New yuan loans totaled 510.7 billion yuan ($74.78 billion) in March.

New MLT loans to households rose 230.3 billion yuan ($33.72 billion) in April, the second highest level ever. The strong growth may be owing to hot property sales in March and early April with a delay in loan issuances, said Lu Zhengwei, an Industrial Bank analyst based in East China's Fujian Province.

Bill financing also increased by 47 billion yuan ($6.88 billion), compared with a drop of 269 billion yuan ($39.39 billion) in March. April saw positive growth for the first time since July 2009.

However analysts generally believe loan growth in April remained stable. Usually banks lend more in the first quarter and first month of each quarter and the April number is still consistent with the annual target of 7.5 trillion yuan ($1.10 trillion) in lending for the year, Wang Tao, head of China Research at USSecurities, said in a note Tuesday.

A decline in the proportion of MLT loans over total loans also indicates credit structure is improving, analysts said. MLT loans accounted for around 70 percent of total new yuan loans in April, lower than the level seen in the first quarter of the year and the second half of last year.

Such a decline will help achieve the goal of controlling credit for the year, Lu said.

Property development loans and mortgage loans are expected to decline. "The impact of property tightening measures on housing sales may start to appear in the May data," Wang said.

Inflationary concerns were not allayed by an improvement in China's credit structure, however. The M2 (broad money) supply grew less than expected in April over last year, while the M1 (narrow money) supply saw a faster growth over last year. The reverse gap between the M1 and M2 expanded, signaling a further increase in money circulation and hinting at potential inflationary risks, Lu said.

The consumer price index (CPI) grew 2.8 percent in April, and the producer price index (PPI) rose 6.8 percent, both exceeding expectations, spurring worries of inflation. The April CPI was the highest in 18 months, approaching a warning limit of 3 percent. Home prices also set a new record April, rising 12.8 percent year-on-year.

"Reading the strong property numbers, especially housing prices, the government is not likely to take their feet off the brakes very soon," Wang said.

Rising inflationary pressure prompted expectations of interest rate hikes this year, while concerns over the global eco-nomic recovery have made the government "more hesitant for the moment," she said.

Source: Global Times


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