Chinese people, renowned for their enthusiasm in saving cash, are becoming less enthused and at the same time more willing to borrow money from banks.
So it would seem from a monthly monetary report from the central bank yesterday.
The country's outstanding renminbi loans by the end of May stood at 21.16 trillion yuan (US$2.65 trillion), up 16 per cent from a year ago. The growth was 3.6 percentage points higher than the same period last year and 0.6 of a percentage point higher than in April.
The steady increase in lending was mainly supported by growth in medium and long-term loans.
However, it seems people are less willing to save there was only 12.2 billion yuan (US$1.5 billion) of new savings in domestic financial institutions in May, the lowest monthly increase in almost five years.
The central bank thought the slow-down could be caused by a boom in the stock market, which staged an upturn from a bear market over the past few months and diverted some of the cash intended for savings accounts.
China's M2, the broader measurement of money supply, rose by 19.1 per cent to 31.67 trillion yuan (US$3.96 trillion) by the end of last month compared to a year ago.
The People's Bank of China had warned of excessive lending and investment growth in its first quarter monetary report issued two weeks ago. It also raised the benchmark lending rate on April 28 to curb loans for investment projects, but chose to keep the official deposit rate unchanged to discourage savings.
Zhu Jianfang, an analyst with CITIC China Securities, said the investment growth might be more moderated in the second half of the year if tightening measures start to take effect, but the growth so far is still "acceptable."
Moreover, consumption demand is strong both within the country and overseas, said Zhu. The trend of solid consumption growth will be maintained, the expert said.
China's retail sales reported stronger-than-expected growth in May, rising 14.2 per cent year-on-year to 617.6 billion yuan (US$77.2 billion), according to the National Bureau of Statistics on Tuesday.
Meanwhile, the renminbi exchange rate remained basically stable last month.
(China Daily 06/15/2006 page9)