CHINA'S bank lending was shrinking in November and the growth of money supply fell to a decade-low and, because of that, economists believe China will not significantly loosen its monetary policy next year.
But slight credit easing and cuts in banks' reserve requirements can be expected as the country pledged to sustain economic growth, they said.
New yuan loans were 562.2 billion yuan (US$88.2 billion) in November, 7.8 billion yuan higher than the same month of last year but 24.6 billion yuan lower than that in October, the People's Bank of China said in a statement yesterday.
M2, the broadest measure of money supply, rose 12.7 percent in November from the same month of last year, the slowest since May 2001. The pace has been behind the central bank's annual target of 16 percent for eight months.
"Broad money and credit growth in November was in line with expectations and suggest that monetary conditions remain relatively tight," Barclays Capital economists Chang Jian, Huang Yiping and Yang Lingxiu wrote in a report. "We believe the PBOC will ensure reasonable money and credit growth under its 'prudent' monetary stance to support economic growth at around 8 percent in 2012."
The figures were released after top authorities in China announced the maintenance of prudent monetary policies in 2012.
Barclays Capital said that outflows and downside risks to growth suggest that more reserve requirement cuts are to be expected to ensure sufficient liquidity, and it forecasted M2 growth will be about 14 percent in 2012.
New loans will be 7.5 to 8 trillion yuan to assume stable capital flows and a reasonable level of total social financing, the report said. The figure is higher than market expectations for this year, which range between 7.2 trillion and 7.6 trillion yuan.
A report by the Bank of Communications said it expects new yuan loans in December to be between 550 billion and 600 billion yuan, and annual lending next year to reach up to 8.5 trillion.
"Growth of consumer prices will be slower in 2012 but mid-term inflationary pressure exists," the report said. "A hard landing is not likely but amid lasting fluctuation on the financial market, the tone of the monetary policy will not change, though it could be relatively easier."
Source:shanghaidaily