In August, RMB loans increased by 54.5 billion yuan over July's total. Incremental loans by the four major state-owned banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Bank of Communications) remained virtually unchanged in August, and the increase was mainly due to raised lending by share-holding and foreign banks.
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New lending by share-holding banks in July totaled more than 18 billion yuan and almost 70 billion yuan in August. Lending by five share-holding banks in July declined but hit positive growth in August. Although the total lending by foreign banks was not so large, it increased by nearly a billion yuan in August after falling by more than three billion yuan in July.
Data show that in August individual consumption loans totaled 194.7 billion yuan, little changed from July, but middle and long-term consumption loans dropped from 180.3 billion yuan to 168.7 billion yuan, and short-term consumption loans increased from 11.9 billion yuan to 26 billion yuan. Middle and long-term consumption loans in July and August remained stable with little decline, consistent with the rising prices but decreasing turnover in commercial housing sales in the past two months.
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Exiting deposits heading for the stock market is a growing trend. Deposits since July have seen a sharp drop, affected by the decline in bill financing. Incremental deposits in each month in the first half year exceeded 1 trillion yuan, but fell drastically to 399.3 billion yuan in July and 327.4 billion yuan in August.
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In July and August, resident deposits decreased by 19.2 billion and 80 billion yuan, personal fixed deposits dropped by 143.2 billion yuan and 91.4 billion yuan, and deposits of non-financial corporations decreased by 173.6 billion yuan and 168.8 billion yuan. Evidence points to the stock market as the main destination for the loose cash. Brokerage customer deposits increased from just several billion yuan in May to more than 270 billion yuan in June, and increased by 400 billion yuan and 150 billion yuan in July and August.
The "savings movement" trend is expected to continue.
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Credit growth in this year's last four months is expected to strengthen. Due to the phenomenal expansion of bill financing in the first half, lending increased rapidly. Excluding bill financing, average monthly mid- and long-term lending in the first six months was about 450 billion yuan, while it was almost 540 billion yuan in both July and August. This shows that investment projects are moving along smoothly, and not disturbed by lending. Mid- and long-term loans have become pillars of economic growth, and are expected to continue rising until the first quarter of next year.
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China's national commercial banks are bullish on lending. Analysts estimate lending in September may reach as high 700 billion yuan, but certainly 400 billion yuan at least. The monthly average lending in the fourth quarter is predicted to reach 300 billion yuan.
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A one-year forward directional central bank bill issued in July for some commercial banks will start paying this week, and the scale may reach hundreds of billions of yuan. In mid-July, many commercial banks received notice of the central bank bill, with interest rate of 1.50% and payment date in mid-September. Analysts see this arrangement as indicating the central bank's intention to curb the lending impulse of commercial banks at the end of this quarter.
As an unconventional tool in the open market, central banks issue directional bills to rapidly lending commercial banks to tighten bank funds and regulate the money supply. Interest rates of directional central bank bills are usually lower than market levels, with punitive effect. However, it is generally believed that this directional central bank bill will not be able to rein in the present rampant lending impulse of commercial banks.
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