New yuan loans gather momentum in May

A China Construction Bank branch in Qingdao, Shandong province. The nation's money supply rose to 118.23 trillion yuan, up 13.4 percent yearonyear. Provided to China Daily

Mini stimulus measures, monetary policy tweaks to keep growth on track

China's new yuan loans increased last month as authorities stepped up their efforts to stabilize the economy and ensure growth by taking "mini stimulus" measures and fine-tuning monetary policy.

New yuan loans reached 870.8 billion yuan ($140 billion) in May, up 12.4 percent from 774.7 billion yuan in the previous month and 30 percent from 669.4 billion yuan a year earlier, the People's Bank of China said in a statement on Thursday.

M2, the broadest gauge of money supply, rose to 118.23 trillion yuan, up 13.4 percent year-on-year, and 0.2 percentage point from the year-on-year M2 growth in April.

The central bank figures also showed that aggregate financing was 1.4 trillion yuan in May, compared with 1.55 trillion yuan the month before.

Credit conditions were obviously looser in May than in April mainly because China has launched a series of mini stimulus policies, said Zhou Jingtong, a senior macroeconomic analyst at the Bank of China Ltd's Institute of International Finance.

"China's monetary policy will tend to ease while still remaining prudent," he said. "The trend is already becoming visible."

The current monetary fine-tuning aims to offer optimum conditions for stable growth, which makes it "essentially different" from the previous round of monetary easing during the 2008-09 financial crisis, Zhou said.

He expects the Chinese economy to stabilize in the second quarter with GDP growth rising to 7.5 percent from 7.4 percent in the first quarter, which was the slowest pace since 2012.

Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong, also said in a report that policy easing will accelerate over the next several months and expected a reserve requirement ratio cut in the third quarter.

The PBOC announced a 0.5 percentage point cut in reserve requirements for certain banks on Monday to encourage targeted lending to the farming sector and smaller companies.

Effective June 16, the reduction applies to two-thirds of city commercial banks, 80 percent of non-county level rural commercial banks and 90 percent of non-county level rural cooperative banks.

The latest reserve requirement cut was launched soon after Premier Li Keqiang told officials from eight cities and provinces, including Beijing, Hebei and Heilongjiang, to be proactive in supporting their local economies as the Chinese economy still faces relatively big downward pressures.

During a meeting with the officials on June 6, Li stressed that the cen

tral and local governments should take responsibility to ensure that the 7.5 percent GDP growth target for this year is achieved and should have "a sense of urgency".

The State Council announced on Wednesday that China will boost public investment in the network construction of railways, highways, waterways and aviation in the Yangtze River region and cut some utility companies' taxes by a total of 24 billion yuan a year.