China's new loans reach 2.6 trillion yuan in first quarter

BEIJING, April 12 (Xinhua) -- China's new yuan-denominated lending in March slumped to 510.7 billion yuan (74.8 billion U.S. dollars) from February's 700.1 billion yuan, the People's Bank of China, the central bank, said Monday.

The March figure brought new yuan-denominated loans in the first quarter to 2.6 trillion yuan, 1.98 trillion yuan less than the corresponding period last year.

"The increase in new loans in the first quarter is reasonable and the momentum of an economic turnaround has become stronger," the central bank said in a statement released on its website.

The figure, although significantly lower than the 4.58 trillion yuan lent in the first quarter of 2009, is still higher than average.

Lian Ping, chief economist of the Bank of Communications, said that 2.6 trillion yuan accounts for 34 percent of 7.5 trillion yuan new lending target this year, which is basically in line with requirements of the regulators.

Zhuang Jian, senior economist with the Asia Development Bank, said that the slump of new loans in March from the first two months resulted from measures taken by the central bank which has kept excessive loans expansion emerged at the beginning of this year under control.

China's new yuan-denominated loans reached 1.39 trillion yuan in January and 700.1 billion yuan in February.

The Chinese government set a target of 7.5 trillion yuan of new loans in 2010. And the broad money supply (M2), which covers cash in circulation and all deposits, will be increased by about 17 percent.

The central bank raised the deposit reserve requirement ratio by 0.5 percentage points twice in the first quarter and resumed China's three-year notes sale for 15 billion yuan after almost two-year suspension to reduce the liquidity.

Liu Yuhui, a researcher with the Chinese Academy of Social Sciences, said that although new lending slowed month by month in the first quarter, the total monetary circumstances are still loose.

The new middle-and-long-term loans exceeded 2.42 trillion yuan, accounting for 93 percent of the total new lends, which give impetus to asset bubbles and inflation, said Liu.

China's consumer price index (CPI) rose by 2.7 percent in February, 1.2 percent more than in January.

A report released by the Department of Policy Studies of the National Development and Reform Commission recently predicted that the average monthly growth rate of the CPI in the first quarter of 2010 would be between 2 percent and 2.5 percent, less than the target of 3 percent set by the central government for 2010.

According to the newly released data, M2 added 22.50 percent from a year earlier to 65 trillion yuan at the end of March. The growth is 3.03 percentage points lower than last month and 5.18 percentage points lower than the end of 2009.

The narrow measure of money supply, M1 (cash in circulation plus current corporate deposits), increased by 29.94 percent to 22.94 trillion yuan, 5.05 percentage points lower than last month and 2.41 percentage points lower than the end of last year.

Renminbi deposits rose 4.04 trillion yuan in the first quarter, 1.58 trillion yuan less than the same period last year.