Slower credit expansion eases 'overheating' concerns

14:42, July 12, 2010      

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Chinese banks issued 603.4 billion yuan in new loans in June, 927 billion yuan less than last June. New loans totaled over 4.6 trillion yuan for the first half of 2010, over 2.7 trillion yuan less than the same period of last year, according to statistics released by the People's Bank of China, China's central bank, on July 11.

A few months ago, investors were worried that China's economy was overheating. But as new loans, the leading economic indicator, grew more slowly this year, their worries may have disappeared to some extent, though this means that China's economic growth may also slow.

Yuan Gangming, a researcher at the Center for China in the World Economy under Tsinghua University, said based on statistics on the industrial added value, loans, investments, and other aspects in recent months, China's economy is not overheating. Instead, the growth rate will slow to a certain extent.

A central bank insider said that in the first half of 2010, the central bank tried to make the macro-control measures more targeted and flexible and the credit policy more practical to ensure balanced loans while continuing the moderately loose monetary policy.

China's M2, or broad money supply, reached 67.4 trillion yuan at the end of June, up almost 19 percent compared with the same period of last year, with the growth rate being 2.5 and 9.2 percentage points lower than that at the end of last month and last year, respectively.

At the same time, China's M1, or narrow money supply, totaled nearly 24.1 trillion yuan at the end of June, up nearly 25 percent compared with the same period last year, with the growth rate being 5.3 and 7.8 percentage points lower than that at the end of last month and last year, respectively. In addition, China's M0 (circulating currency) reached 3.9 trillion yuan at the end of June, up nearly 16 percent compared with the same period last year.

The expansion of bank loans has slowed and China's financial system operated smoothly, which has consolidated the upward trend in China's national economy, according to the People's Bank of China.

The Purchasing Managers' Index (PMI) for June dropped to 52.1 from 53.9 in May, down 1.8 points, worsening people's fear of a slowdown in the manufacturing industry because enterprises in some sectors had seen shrinking demand for currency loans over the past two months.

However, some experts say that there are fluctuations in economic growth. A sharp downturn may not appear if the Chinese government further conducts more flexible and effective macro-controls.

By People's Daily Online

(Editor:祁澍文)

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