China overshot its bank loan target last year and finished the year with money growth still running too fast.
A record $199 billion surge in foreign exchange reserves in the fourth quarter pushed China's stockpile, already the world's biggest, to $2.85 trillion, highlighting that money streaming in from abroad was complicating policy tightening efforts.
Chinese banks issued 7.95 trillion yuan ($1.2 trillion) in new loans last year, the central bank said today, more than the 7.5 trillion yuan that the government wanted for the full year. The broad M2 measure of money supply grew 19.7 per cent, also topping the official target of 17 per cent.
"Lending is still excessive and China's process of monetary normalization has not finished yet," said Wu Tujin, economist with Guosen Securities in Shenzhen. "That means China will still face high pressure from inflation and asset bubbles."
More than just an economic issue, high-speed money and credit growth has become a political concern, helping propel Chinese consumer inflation to its fastest rate in more than two years.
Determined to rein in rising prices, a source of public discontent, the government declared late last year that it would shift to a tighter monetary policy stance. Some effects of that could be seen in the data for the final month of the year.
Chinese banks extended 481 billion yuan in new loans in December, down from 564 billion yuan in November and the lowest in one year.
But the December figures also showed that the impact of policy tightening thus far has been less severe than the market had expected. The median forecast of economists was for issuance of 380 billion yuan in new loans.
The People's Bank of China raised interest rates twice last year and officially increased lenders' required reserves six times.
In another move to ease the build-up of cash in the economy, China will allow residents of the wealthy coastal city of Wenzhou to invest in select markets overseas, an experiment in liberalizing the tightly controlled capital account.
Reuters