The central bank data released on Thursday added to reassuring signs
that the world's second largest economy is pulling out of its soft
patch -- first quarter growth of 7.4 percent was the slowest in 18
months - but the recovery appears patchy.
A mini-stimulus package has helped, and analysts do not rule out
more measures by Beijing, especially if the property market starts
to deteriorate rapidly.
"Policymakers' efforts to channel bank lending to chosen parts of
the economy are helping to support loan growth, even as controls on
shadow banking continue to bite, Julian Evans-Pritchard, China
economist at Capital Economics, said in a note.
"Although this has helped to stabilize credit growth, policymakers
are likely to stop short of driving a major credit rebound."
Chinese banks made 870.8 billion yuan ($140.08 billion) worth of new
yuan loans in May, 12.4 percent more than in April and higher than a
forecast of 750 billion yuan.
The modest pick-up in bank credit reflected efforts by the People's
Bank of China to support growth while reducing elevated debt levels.
The PBOC has pledged to keep credit and money supply growth at a
reasonable level to meet the needs of the real economy. It aims for
a 13 percent annual rise in M2 this year.
Broad M2 money supply rose 13.4 percent in May from a year earlier,
the central bank said in a statement on its website, www.pbc.gov.cn,
quickening from 13.2 percent rise in April and ahead of forecast in
a Reuters poll of a 13.1 percent rise.
Outstanding yuan loans grew 13.9 percent from a year earlier versus
forecasts for growth of 13.7 percent.
Aggregate total social financing, a broad measure of liquidity in
the economy, was 1.4 trillion yuan in May versus 1.55 trillion yuan
the month before.
JURY STILL OUT
"It is still too early to confirm a broad-based stabilization in the
economy, and we will have to wait for more financing data to help
prove this trend," said Yao Xuekang, an analyst at Essence
Securities in Beijing.
The government is due to release industrial output, retail sales and
fixed-asset investment on Friday.
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The PBOC said on Monday it would lower the reserve requirement ratio
- the level of reserves banks must hold - for those banks that have
sizeable loans to the farming sector and small and medium-sized
firms. This is the second reduction following a cut in April aimed
at rural banks.
More targeted policy steps are expected as the government tries to
cope with a cooling property sector, even as exports get some relief
from the global economic recovery.
Top leaders have ruled out any large-scale stimulus as China remains
burdened with piles of local government debt, the hangover from a 4
trillion yuan ($652 billion) spending package implemented in
2008-2009. China's banking regulator said last week that supervision
of the shadow banking sector will be tightened further as part of a
campaign to control off-balance sheet lending by financial
institutions that could pose large hidden risks.
Data released earlier in the week showed central and local
governments responding to the economy's slow start to the year by
spending more. Their total fiscal spending surged nearly 25 percent
in May from a year earlier, quickening sharply from a 9.6 percent
rise in the first four months of the year.
On Thursday, Standard & Poor's affirmed its AA- rating on China's
long-term sovereign debt with a stable outlook, citing the country’s
solid growth prospects, strong external and fiscal positions.
(Reporting by China Economics Team; Editing by Kim Coghill and Simon
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