China bank loans slump in July

China's bank lending slumped 41.3 percent in July from the previous month, the central bank said Friday, compounding worries over the gloomy outlook for the world's second-largest economy.

Chinese banks extended 540.1 billion yuan ($84.9 billion) in new loans in July, compared with 919.8 billion yuan in June, the People's Bank of China said in a statement.

The lending figure is well below a median forecast of 665 billion yuan, according to a poll of 14 economists by Dow Jones Newswires.

It also came after bleak economic data for July released this week, including trade, output and retail sales figures, which pointed to continued weakness in the domestic economy.

China's economy has been weakening, recording a 7.6 percent growth rate for the second quarter, its slowest pace in more than three years.

The government has this year taken the rare step of slashing interest rates twice in quick succession while also lowering requirements for how much money banks must keep in reserve as it looks to spur lending and boost growth.

Liao Qun, chief economist at Citic Bank International in Hong Kong, said despite the efforts of policymakers, sluggish borrowing demands from domestic companies led to the sharp fall in new loans.

"Many companies are taking a wait-and-see approach toward borrowing from banks for production, mainly due to their lack of confidence over the outlook of both the domestic and overseas economies," Liao told AFP.

"But as China continues to loosen its monetary policy to stabilise growth, companies' borrowing demands may gradually pick up and we may see a significant rebound in bank lending in the fourth quarter," he added.

China said on Thursday its inflation eased to a 30-month low of 1.8 percent in July, giving the government more policy leeway to spur economic growth.

Analysts have been forecasting a cut by Beijing in banks' reserve requirements or interest rates as early as this month.

The central bank also said that for the first seven months of this year Chinese banks extended 5.4 trillion yuan in new loans, up 15.7 percent from the same period last year.

Source: http://news.yahoo.com/china-bank-loans-slump-july-132405051--finance.html

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