Chinese banks wrote 587 billion yuan ($92.5 billion) of new loans in October, much more than expected and a sharp jump from September, evidence of "selective" policy easing by the government to keep the world's second-largest economy on an even keel.
But annual growth in China's broad M2 measure of money supply eased to 12.9 percent from 13.0 percent in September, suggesting monetary conditions remained relatively tight. The median forecast by economists was for 500 billion yuan in new loans in October, up from 470 billion yuan in September, and a 13.0 percent rise in M2. "New yuan lending is more than expected, showing that policy is being relaxed," Sun Wencun, an economist at CITIC Securities in Beijing.
"This trend will continue for the rest of this year and banks will probably extend about 1.3 trillion yuan of new loans in the final two months. However, a cut in banks' required reserves is unlikely this year," he said. Chinese banks extended a total of 6.3 trillion yuan in new local currency loans in the first 10 months of 2011, still far below the estimated annual credit quota of 7.5 trillion yuan set at the beginning of this year.
The central bank has never announced the quota. Household deposits at Chinese banks fell a net 727.7 billion yuan in October, reflecting a savings flight to higher-yielding wealth management products and even underground lending markets that the government has been trying to contain. China's annual inflation fell to 5.5 percent in October from September's 6.1 percent, pulling back further from a three-year high of 6.5 percent in July, but it remained above the government's full-year target of 4 percent.
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