New lending in China surged last month, official data showed yesterday, but a lower-than-expected rate of inflation eased concerns that officials would move quickly to tighten the flow of credit.
Massive lending last year in China has triggered fears that the excess liquidity is fueling inflation and feeding a spending spree by speculators, leading to property and stock market bubbles.
But analysts said the 1.5 percent on-year increase in the consumer price index, the main gauge of inflation last month, was not enough to prompt the imposition of quick tightening measures in the world’s third-largest economy.
New lending surged to 1.39 trillion yuan (US$203.5 billion) last month, and property prices rocketed at the fastest rate since April 2008, government data showed.
The consumer price increase was mainly driven by food prices, which rose 3.7 percent during the first month of the year, the data released by the National Bureau of Statistics showed. However, inflation slowed from December, when prices rose 1.9 percent.
Analysts said that tightening measures were unlikely in the short term, agreeing with central bank governor Zhou Xiaochuan’s (周小川) assessment that inflationary pressures would remain mild in the short term.
“Any systematic tightening across the board will ... be based on careful analysis of the reasons for the price rises,” such as an overheating of overall demand, said Zhang Zhizhou, an economist with CEB Monitor Group.
Economists at the Bank of Communications said excess liquidity should be reined in in a “timely manner,” but said the end of China’s loose monetary policy would be “gradual.”
“It is not suitable to impose prompt, stiff tightening,” they said in a note.
China took steps last month to calm growing inflationary pressures, as well as soaring stock and property prices caused by runaway bank lending, which nearly doubled last year from a year before to 9.6 trillion yuan.
The People’s Bank of China twice raised the interest rate on both its benchmark three-month and one-year treasury bills in a bid to deter new lending.
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