People’s Bank of China: Chinese bank loans fall short of expectations in February

125px-Flag_of_the_People's_Republic_of_China.svgLast month, Chinese banks issued $99.76 billion in loans in an effort to withdraw liquidity and reduce inflationary risks, falling short of market expectations of $120.62 billion.

Bank lending is an indicator used by investors to assess the bias and impact of the government’s monetary policy. The value of loans in February was significantly lower than the $170 billion issued in January, an indication that that the People’s Bank of China’s attempt at controlling inflation has been successful, International Business Times reports.

“Bank lending slowed in February due to the central bank’s liquidity move and also cooling capital inflows,” Hua Zhongwei, the senior economist at Beijing-based Huachuang Securities, said, according to International Business Times. “I think monetary policy will be neutral in the near term.”

Hua said that he expects inflation to slow to 2.6 to 2.7 percent in March, thereby reducing pressure on the nation’s central bank to shore up financial policy.

The new data from the Chinese central bank was released just one day after the government said that inflation increased to a 10-month high last month. Consumer spending as per the consumer price index rose 3.2 percent in February year-over-year, surpassing expectations of a three percent increase. Annual factory production was 9.9 percent for January and February combined, the lowest level since October,International Business Times reports.

The People’s Bank has begun to withdraw short-term cash and has pressured commercial banks to ease lending. Last month, the central bank siphoned $40.69 billion from the banking system. Analysts indicated that capital inflows may have also begun to level off, particularly after the government’s move to tighten fiscal policy.

Additionally, China’s M2 money supply rose by 15.2 percent last month year-over-year, surpassing expectations of a 15.1 percent rise but decreasing from January’s 15.9 percent increase. China’s central bank has established a 13 percent annual growth target for M2 money over the coming year, a decrease from last year’s growth of 13.9 percent. The government seeks economic growth of 7.5 percent in the coming year and 3.5 percent annual inflation, according to International Business Times.

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