Business / Macro

Long-term loan surge points to stabilizing economy

(Xinhua) Updated: 2013-08-30 14:01

BEIJING -- The Chinese economy is showing signs of stabilizing as demand for medium and long-term loans soar and falling wholesale prices ease, said an industry report.

An analysis of the Industrial and Commercial Bank of China published in Friday's Shanghai Securities News said, "A string of economic data indicated that China's recent measures to stabilize growth, restructure the economy and promote reforms are showing effect."

The country's new yuan-denominated loans stood at 699.9 billion yuan ($113.49 billion) in July, 159.8 billion yuan more than a year ago, according to central bank data.

Medium and long-term corporate loans accounted for 62.6 percent of new lending in July, 17.8 percentage points higher than a month ago. It rose by 52.8 billion yuan from the June level.

Medium and long-term lending refers to loans with a period of over one year that are provided by commercial banks for fixed-asset investment. The amount of such loans can indicate expectations for corporate profits.

"The growth in medium and long-term loans sent the signal that demand from Chinese companies is increasing and the real economy is likely to stabilize," said the report.

As the country's support policies filtered through, the producer price index (PPI), which measures prices at wholesale level, also improved, said the report.

PPI, which gauges price of goods when leaving factory gates, continued a downward trend in July but decreased at a slower pace for the first time since April.

It fell 0.3 percent month on month, narrowing from June's 0.6-percent decline, the National Bureau of Statistics said. Easing PPI is usually expected to boost companies' willingness to increase production.

The report said other economic indicators including factory output and foreign trade, also showed that China may be gradually stabilizing after a protracted slowdown.

Against this backdrop, China's liquidity will remain tight, said the report, adding that foreign capital outflows and the country's deleveraging measures will also contribute to a tight monetary environment.

"But the central bank has the willingness to continue financial support to the real economy, as evidenced by the recent open market operations," said the report, citing a total of 300 billion yuan injection into the economy through reverse repurchase operations in late July.

China's economic growth eased to 7.5 percent in the second quarter, down from 7.7 percent in the first three months and 7.9 percent in the final quarter of last year.

Instead of initiating a massive stimulus program, the authorities are moving cautiously, including speeding up shantytown renovation, accelerating railways and infrastructure investments and reducing taxes for small businesses, to steady growth.

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