China Watch Blog has learnt that Chinese lenders extended fewer new yuan loans than expected for a second consecutive month in February. sparking expectations of further monetary-easing policies from the authorities to guarantee enough liquidity for the real economy, including manufacturing and services.
The China Daily reported that banks lent out 710.7 billion yuan ($112.5 billion) last month, below market expectations of 750 billion yuan, according to data released by the People’s Bank of China, the central bank, on Friday.
M2, a broad measure of money supply that covers cash in circulation and all deposits, grew by 13 percent year-on-year by the end of February, 0.6 of a percentage point higher than a month earlier, but below the government’s 14 percent target for the year.
In January, Chinese lenders lent 738.1 billion yuan, scattering market expectations of 1 trillion yuan. Meanwhile, M2 hit the lowest level since June 2001.
“The lower-than-expected amount of new yuan loans last month was probably caused by the fact that banks have become more prudent in lending, and lending demand from companies declined as economy further slowed,” said Wu Xiaoling, a former deputy governor of the PBOC.
Wu added that the lending of some banks, especially those joint-stock commercial banks, might have been restrained by a deposit-to-loan ratio of 75 percent.
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