Bank lending in China grows by 20% in October, a sign that the People's Bank is loosening

11/11/2011 6:05 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Yet another sign that China is starting to move toward reversing the moves that slowed the economy in a still-ongoing fight against inflation.

Local-currency lending jumped to 587 billion yuan ($92.5 billion) in October, the People’s Bank of China announced on November 10. That was a 20% increase from September and the highest total since June. Money supply measured by M2 climbed 12.9%.

In my opinion the People’s Bank has already started a very gradual easing—no interest rate cuts yet—in response to falling real estate sales (transactions were down 25% in October) and slowing exports (the October increase was the slowest growth rat in two years.)

The pattern of the lending increase in October makes me believe that word has gone down—and relatively recently at that—to increase lending. More an a third of the 240 billion in loans extended in October by China’s four biggest state-owned banks were extended in the final two days of the month, according to the 21st Century Business Herald.

On this trend new loans in November and December would come to about 650 billion yuan in each month, Daiwa Capital Markets calculates. That would put roughly 17% of the year’s total of a projected 7.5 trillion yuan in the last two months of the year. That would be a convincing sign that the loosening has accelerated.

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