China's expanding new lending, forex raise inflation, "hot money" concerns

22:20, October 13, 2010      

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China saw large increases in both new lending and foreign exchange reserves last month, triggering more concerns over rising inflationary pressures and "hot money" inflows, the country's central bank said Wednesday.

New yuan-denominated lending in September rose to 595.5 billion yuan (89.28 billion U.S. dollars), an increase of 9.2 percent from August, the People's Bank of China (PBOC), the central bank, said in a statement on its website.

China's banks extended 6.3 trillion yuan from January to September, 2.36 trillion yuan, or 27.3 percent, less than the same period in 2009, it said.

Yuan loans outstanding at the end of September totaled 46.28 trillion yuan, 18.5 percent higher than a year earlier, said the statement.

Annual growth in the broad M2 measure of money supply, including cash in circulation and all deposits, was 19 percent in September, compared with 19.2 percent last month.

The country's narrow M1 measure of money supply, which covers cash in circulation plus current corporate deposits, increased by 20.9 percent in September year on year, one percentage point and 11.5 percentage points lower than that of this August and the end of last year.

Zhao Qingming, a senior researcher with China Construction Bank, said the expansion in new loans last month was "a little bit beyond the regulators' expectation," which also explained the central bank's recent move on liquidity control.

The PBOC on Tuesday temporarily raised the reserve requirement ratio of its four major state-owned lenders and two privately-owned banks, China Merchants Bank Co. and Minsheng Banking Corp., by an extra 50 basis points, or 0.5 percentage points, in reserves.

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