"China’s New Lending Doubles, Helping Fuel Recovery (Update1)
June 12 (Bloomberg) -- China’s new lending doubled in May from a year earlier, adding to a credit boom that is supporting the government’s 4 trillion yuan ($585 billion) stimulus plan.
New lending was 664.5 billion yuan, the central bank said on its Web site today. M2, the broadest measure of money supply, rose 25.7 percent.
The government is battling to overcome an export collapse by flooding the economy with money to fuel domestic demand. Fitch Ratings said last month that it’s “increasingly wary” of China’s banking industry as it expects an increase in bad debts, and the nation’s banking regulator has urged lenders to ensure they don’t loosen management of loans.
“Stimulus always is good for the economy in the short run but this may come with a cost for long-run prospects,” said Ha Jiming, chief China economist at China International Capital Corp. in Hong Kong.
The yuan was trading at 6.8329 against the dollar as of 9.33 a.m. in Shanghai, compared with 6.8348 at yesterday’s close. The Shanghai Composite Index fell 0.2 percent.
Domestic banks extended a record 5.83 trillion yuan of new loans in the first five months of 2009, almost triple the value of advances in the same period a year earlier. New lending in May was the second-lowest level this year.
An index tracking the confidence of 2,900 heads of financial institutions rose to 40 percent, up from 25.6 percent three months earlier.
A record 1.89 trillion yuan of loans in March highlighted concerns that banks may be lowering their lending standards. Besides the risk of bad debts, the credit boom may inflate asset prices and increase the likelihood of inflation making a comeback. The Shanghai Composite Index has climbed 54 percent this year.
Other signs of recovery include urban fixed-asset investment gaining the most in five years, surging property sales, and manufacturing expanding for a third month in May as the stimulus package spurred demand, data this week showed.
Exports plunged a record 26.4 percent last month and dragged economic growth to the weakest pace in almost 10 years in the first quarter. Consumer prices fell 1.4 percent in May from a year earlier even as money flooded into the economy.
“The strength of lending growth is good for the economy and good for the stock market in the short term,” said Paul Cavey, an economist with Macquarie Securities Ltd. in Hong Kong. “In the medium term, it’s bad for the banks and it’s bad for the economy.”
New lending may reach 8 trillion yuan in 2009, said Wang Tao, an economist with UBS AG in Beijing."China’s Industrial Output Rebounds, Aiding Recovery (Update1)
By Bloomberg News
June 12 (Bloomberg) -- China’s industrial production rebounded in May, adding to signs that the world’s third-biggest economy is recovering from its worst slump in almost a decade.
Output rose 8.9 percent from a year earlier, the statistics bureau said today, after gaining 7.3 percent in April. That was more than the 7.7 percent median estimate of 16 economists surveyed by Bloomberg News.
Surges in lending, investment and auto and property sales suggest Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus plan is working. Rising unemployment and a record drop in exports have added to the challenge of reviving economic growth from the weakest pace in almost a decade.
“A recovery is on track,” said Ha Jiming, chief China economist at China International Capital Corp. in Hong Kong. “The hope now is that stimulus spending can also help to pull up private-sector activity.”
Retail sales rose 15.2 percent, up from last month’s 14.8 percent, the statistics bureau said today. The economists’ median estimate was 15 percent.
The Shanghai Composite Index rose 0.3 percent as of 10:24 a.m. local time.
Today’s industrial production number compares with a collapse in output growth to 3.8 percent in January and February combined. In May last year, production rose 16 percent.
The Shanghai Composite Index has climbed 53.5 percent this year on optimism that company profits will revive as economic growth accelerates. Jiangxi Copper Co., the nation’s biggest producer of the metal, has soared 212 percent.
The industrial-output number is “good news for the stock market because it shows that the government’s policies are working,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong.
The car industry is among the winners from government efforts to spur growth, as tax cuts and subsidies for buyers extend China’s lead over the U.S. as the world’s biggest auto market this year.
Beijing drivers, used to leaving showrooms with new cars on the same day, now have to wait about three weeks for a Hyundai Motor Co. Yuedong Elantra or as long as eight weeks for a Honda Motor Co. CR-V sport-utility vehicle.
Economic data released yesterday illustrated strength in the domestic economy and weakness in global demand.
Urban fixed-asset investment surged 32.9 percent through May from a year earlier as the government pumped money into railways, roads and low-cost housing. Property investment also picked up. In contrast, exports declined 26.4 percent in May, the most since data began in 1995.