New bank loans down sharply in July

New loans in July dropped to less than a quarter of the level seen a month earlier, the People’s Bank of China (PBC) said today, as banks reined in lending of the first half.

New loans dropped sharply to 355.9 billion yuan ($52 billion) last month from 1.53 trillion yuan ($223.8 billion) in June, PBC said in a statement.

The decline met market expectations that banks would slow their lending pace after new loans surged to 7.37 trillion yuan ($1.08 trillion) in the first half of 2009.

Meanwhile China’s broad measure of money supply rose by 28.42 percent from a year earlier at the end of July, slightly lower than the 28.5 percent rise at the end of June, PBC said.

Economists said the lending slowdown was unlikely to lead to a credit squeeze.

“The massive amount of loans extended in the first half have not all been spent yet,” said Li Huiyong, chief economist with Shenyin and Wanguo Securities in Shanghai.

“There are ample funds to sustain high investment growth even though the lending growth is capped in the second half,” he said.

AFP

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