By Bloomberg News
Aug. 10 (Bloomberg) -- China’s new lending in July may have fallen to a third of June’s level as banks sought to limit credit risks and slow the flow of money into stocks and property.
New loans cooled to 500 billion yuan ($73.2 billion), from 1.53 trillion yuan, according to the median estimate of 11 economists surveyed by Bloomberg News. The central bank may release a preliminary figure today.
Policy makers are struggling to prevent bad loans and asset bubbles without derailing the recovery of the world’s third- biggest economy. Premier Wen Jiabao reiterated in a statement yesterday that monetary and fiscal policy will remain unchanged because of “difficulties and challenges” including sliding export demand and industrial overcapacity.
“Credit risk has been a concern in China since loans started surging at the start of the year,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney. “We’re definitely seeing bubbles in the stock market.”
The government will scrutinize gains in stock prices without capping new lending after a record $1.1 trillion in loans in the first half, officials said Aug. 7.
Exports probably fell for a ninth month in July from a year earlier, sliding 23 percent, economists’ forecasts showed. Imports may have declined 15 percent, resulting in a trade surplus of $10.6 billion. Those numbers are scheduled to be released tomorrow.
Investment, Output
Most other key economic data for July are also due tomorrow, after the statistics bureau altered its schedule.
Surging lending helped power a 34 percent increase in urban fixed-asset investment in the seven months through July from a year earlier, according to economists’ forecasts.
Industrial production growth may have accelerated to 11.5 percent in July, after gaining 10.7 percent in June, as stimulus spending stoked domestic demand, countering the slump in exports.
Consumer prices declined for a sixth month in July, dropping 1.6 percent, while producer prices fell a record 8.3 percent, according to economists’ forecasts.
“We expect deflation to moderate,” said Wang Qian, an economist with JPMorgan Chase & Co. in Hong Kong. “Although global oil and commodity prices eased somewhat in July, prices of onshore industrial metals, such as steel, have started to rise given the strong growth outlook.”
Inflation is not a concern, Su Ning, a deputy central bank governor, said Aug. 7.
Surging Money Supply
M2, the broadest measure of money supply, probably rose by a record 28.7 percent last month from a year earlier, according to the economists’ forecasts.
The Shanghai Composite Index has rallied almost 80 percent in 2009 and real-estate prices have rebounded, fueling concern that loans meant for infrastructure projects are being used for speculation. The central bank said Aug. 5 that it will use “dynamic fine-tuning” and guide “appropriate” lending growth.
“Authorities have quietly reinstated the loan-quota controls on banks,” said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “We expect short-term loans and discount bills to retreat most dramatically, while medium and long-term loans take up a bigger share overall.”
China Construction Bank Corp. President Zhang Jianguo said last week that the world’s second-largest bank by market value will cut new lending by about 70 percent to avert a surge in bad debt.
“We noticed that some loans didn’t go into the real economy,” Zhang said in an Aug. 6 interview in Beijing. “I feel that some industries are expanding too rapidly. For example, housing prices are rising too fast, and housing sales are growing too fast.”
China’s gross domestic product grew 7.9 percent in the second quarter after a 4 trillion yuan ($585 billion) stimulus package spurred lending and boosted consumption and investment.
Retail sales may have climbed 15 percent last month from a year earlier, matching June’s pace, economists’ forecasts showed.
To contact the Bloomberg News staff on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
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