China's new yuan loans up in July

BEIJING -?China's new yuan-denominated lending rose sharply in July, new data showed, due to the central bank's monetary easing and the government's continuing pro-growth measures.

New yuan loans hit 1.48 trillion yuan ($241.8 billion) last month, up 1.61 trillion yuan from a year earlier, according to data released by the People's Bank of China (PBOC) on Tuesday.

The increase was beyond market expectations and is mainly attributed to monetary easing, including interest rate cuts, and official policies to prop up the real economy.

Repeated easing measures in the first half of the year ensured abundant liquidity in the market, the PBOC said in a statement.

Lower bank deposit reserve ratios led to sufficient money supply and prompted lenders to make loans, while rate cuts made cheaper funding available and stimulated credit demand, the statement said.

The central bank has cut both the reserve requirement ratio and interest rates three times since the beginning of this year.

An eased monetary market could be indicated by accelerating M2 growth. M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 13.3 percent year on year at the end of July, up from May's 10.8 percent and June's 11.8 percent.

The loans were also boosted by measures that aimed to prop up growth. In the first 7 months, new yuan loans amounted to 8.04 trillion yuan, up 2.15 trillion yuan from a year ago.

The PBOC said warming investment in the real economy has driven up working capital loans and a recovering property sector triggered improved housing mortgages.

Given falling exports weighed on by slack external demand, the moderate credit growth will be boon for the real economy, especially the improvement of domestic demand, the PBOC said.

The PBOC admitted recent government stock market bailouts also exerted influence on credit growth, but expect the impacts from those provisional rescue measures will gradually recede after the capital market stabilizes.

The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, rose 6.6 percent year on year to 35.31 trillion yuan at the end of last month.

However, China's total social financing (TSF), a measure of funds to non-financial firms and households from the financial system, remained relatively moderate.

The TSF stood at 718.8 billion yuan in July, down 1.11 trillion yuan month on month but up 532.7 billion yuan from a year ago.