China says October bank lending up 25% on month

Saturday, 12 November 2011 00:00 -     - {{hitsCtrl.values.hits}}

BEIJING (AFP): New loans issued by Chinese banks rose almost 25 percent in October from the previous month, official data showed Friday, after Beijing ordered banks to boost lending to cash-strapped small businesses.

China’s state-owned banks gave out 586.8 billion yuan ($92.5 billion) in new loans last month, compared with 470 billion yuan in September, the central bank said in a statement.



The value of new loans beat analyst forecasts of 500 billion yuan, Dow Jones Newswires said, and came after authorities ordered lenders to increase support for small businesses amid concerns about an explosion in underground lending.

The China Banking Regulatory Commission said last month banks should ensure that the growth of loans for small businesses keeps pace with overall lending and to “boost support” for borrowers of less than five million yuan.

Many private bosses have been forced to borrow money at high interest rates from informal lenders after being rejected by major banks who favour other state-controlled enterprises whose debts are implicitly guaranteed by the government.

But the disappearance of more than 90 entrepreneurs in the eastern city of Wenzhou over high debts has fuelled concerns that the flourishing informal lending market could collapse and destabilise China’s financial system.

Officials also worry that a surge in bankruptcies could trigger widespread job losses, especially in the key manufacturing sector, and lead to social unrest in the country of more than 1.3 billion people.

The broadest measure of money supply, M2, was up 12.9 percent year-on-year at the end of October, slightly slower than the 13.0 percent growth recorded in September, the central bank said.

Policymakers have been pulling on a variety of levers to rein in bank lending over fears of soaring property prices and inflation, which Beijing worries could trigger social unrest.

But signs of a slowdown in China and turmoil in Europe and the United States has fuelled speculation that authorities will start to ease credit restrictions in the coming months to spur the world’s second-largest economy.

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