China’s money supply and bank lending fall
China’s money growth slowed to a 30-month low in May and banks extended fewer new loans than expected as tight monetary policy weighed on bank lending.
Despite signs that growth in the world’s second-biggest economy is cooling slightly, ongoing stubbornly high inflation is expected to persuade the government to keep its foot on the credit brakes.
Chinese banks extended 551.6bn yuan (£52.3bn) worth of local currency loans in May, central bank data showed, missing market forecasts for 610bn yuan.
Annual growth in China’s broad M2 measure of money supply slowed to a 30-month low of 15.1 per cent in May, while outstanding yuan loans at the end of the month grew 17.1 per cent from a year ago.
Bank lending is a focal point in China’s monetary policy because it is controlled by Beijing through loan quotas to manage economic growth and control inflation.
Analysts said taming price pressures remains a top priority for Beijing, especially as policymakers see little chance of a sharp slowdown for now.
“We continue to look for one more interest rate hike in June and believe it is too early to loosen policy,” said Jian Chang at Barclays Capital in Hong Kong, while noting there was a chance the rate increase could be delayed until July.
The timing of the next rate rise could well depend on May inflation data expected tomorrow.
Analysts polled by Reuters predicted annual inflation edged back up to 5.4 per cent in May, the highest in more than 30 months, and a government researcher said in remarks reported on Sunday that it may accelerate to more than six per cent in June.
Most analysts said, however, that the moderation in money growth and bank lending were more a result of Beijing’s lending restrictions rather than a drop off in demand for loans.