Weak demand pushes Sept local currency lending below par

China's new yuan lending in September fell below expectations as demand remained weak amid slow economic growth.

Banks lent 623.2 billion yuan (US$99 billion) of local currency loans last month, 80.7 billion yuan less than August but 153.9 billion yuan more than a year earlier, the People's Bank of China said in a statement yesterday. That fell short of expectations of 700 billion yuan by a Bloomberg News survey and 650 billion yuan by a Reuters survey.

"Bank lending saw a boost in previous months because of the start of several railway projects, but otherwise demand for loans remained weak," said Xiao Bo, an analyst with Huarong Securities.

The combined yuan lending in the first nine months amounted to 6.72 trillion yuan, 1.04 trillion yuan more than the same period of last year.

Total social financing, including loans, bank acceptance bills, corporate bonds and equity financing, was 11.73 trillion yuan in the first three quarters, 1.92 trillion yuan more than the same period of last year.

Despite the slow economic growth and weak demand for loans, analysts said China may not loosen its monetary policy.

"China is not excessively pursuing fast growth of GDP now," Xiao said. "The monetary easing measures in many countries, such as the United States and Japan, can help lift external demand. Those have also limited China's room for monetary easing as they may ignite inflation."

Zhang Jing, an analyst with Huatai Securities, said wider fluctuation of cross-border money flow, which also impacts market liquidity, will prevent the central bank from making any monetary policy changes, at least in the near term.