By Owen Fletcher
Of DOW JONES NEWSWIRES
BEIJING (Dow Jones)–Lending and money supply in China both grew faster than economists’ estimates in December, data from the People’s Bank of China showed Sunday, in a signal that could help ease concerns about an economic slowdown in China.
The PBOC also said it will aim this year to innovate ways to use the country’s massive foreign-exchange reserves, which stood at $3.2 trillion at the end of September, and said it will explore cross-border yuan services for individuals.
China’s broadest measure of money supply, M2, was up 13.6% at the end of December from a year earlier, faster than the 12.7% rise at the end of November, the data showed. Economists had expected M2 to have risen 12.9%, according to the median forecast of 11 economists polled by Dow Jones Newswires.
Chinese financial institutions issued CNY640.5 billion of new yuan loans in December, up from CNY562.2 billion in November and above the median CNY580 billion forecast of 10 polled economists.
New yuan loans in 2011 totaled CNY7.47 trillion, which the PBOC said was CNY390.1 billion less than the amount of new loans in 2010. That implies new yuan loans in 2010 were CNY7.86 trillion, less than the CNY7.95 trillion the PBOC previously reported, due to an accounting exclusion for the new data.
The high December data comes after the PBOC cut its reserve requirement ratio for banks by 0.5 percentage point effective Dec. 5, the first such cut since December 2008. Chinese leaders have also called for measures to ensure adequate financing for smaller companies.
“Small and medium-sized enterprises, especially micro-enterprises, are still having troubles, so better measures are needed structurally to solve this problem,” PBOC Gov. Zhou Xiaochuan said on state TV.
PBOC adviser Li Daokui said December’s high money-supply growth might not be a result of looser policy as the figure can be volatile at the year’s end. Fiscal spending and bank lending in China often surge ahead of year-end budget or quota cutoffs.
Observers will “need to wait and see” whether the PBOC will further cut reserve requirements, Li said.
The PBOC reiterated it will keep its “prudent” monetary policy stance this year and “fine-tune” it, and said it will make further preparations to launch a deposit insurance system.
Cross-border trade settlement in yuan in 2011 was CNY2.08 trillion, including CNY1.56 trillion in goods trade, the PBOC said. Direct investment settled in yuan in 2011 totaled CNY110.9 billion, including CNY20.2 billion in outward investment and CNY90.7 billion in inward investment by foreign companies, it said.
-By Owen Fletcher, Dow Jones Newswires; 8610 8400 7702; owen.fletcher@dowjones.com
–William Kazer contributed to this article.
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