BEIJING: China’s bank lending tumbled in October and money supply growth cooled, raising fears of a sharper slowdown in the economy and prompting some economists to urge the government to ratchet up stimulus measures, including cutting interest rates.
Chinese banks made a much less-than-expected 548.3bn yuan ($89.5bn) worth of new loans in October, down 36 percent from September, central bank data showed yesterday, pointing to deepening economic weakness in the fourth quarter.
The drop in credit came after some banks reported bad loans rose at their fastest clip in two years over the summer, while deposits shrank, limiting their ability to lend and highlighting growing strains on the financial system as the world’s second-largest economy cools.
“The downward pressure on the economy will increase if we don’t step up policy support,” said Wang Jun, senior economist at China Centre for International Economic Exchanges (CCIEE), a well-connected think-tank in Beijing.
Wang said the central bank should first consider cutting reserve requirement ratios (RRR) for all banks to encourage them to lend more, although cutting interest rates remains an option.
Broad M2 money supply rose 12.6 percent in October from a year earlier, trailing market expectations of 12.9 percent and the second slowest growth rate in 2-1/2 years. Other data on Thursday also showed that China’s economy lost further momentum in October, with factory growth dipping and investment growth hitting a near 13-year low.
Reuters
