Bank lending in China continued to grow despite efforts by the central bank to keep a lid on liquidity and potential inflation threats. Foreign exchange reserves reached $3.2 trillion, a new record, by Q2′s end; this caused some analysts to predict that Beijing would further raise interest rates and tighten the market further in an effort to prevent inflation from causing unrest.
Reuters reported that, according to the central bank, China’s banks lent nearly 634 billion yuan ($98 billion) in new yuan loans in June. That outpaced the expectation of 590 billion yuan and came in considerably above 552 billion yuan in May, despite Beijing’s efforts to slow the pace of lending.
Paul Tang, chief economist at Bank of East Asia in Hong Kong, was quoted saying, “… The People’s Bank of China will continue to keep a close watch on credit growth. The government will need to keep up its tightening stance in the second half of the year.”