-Annette Beacher, head of Asia-Pacific Research at TD Securities
China's banks increased their lending in September, but analysts still stress that more monetary easing is required to prop up the ailing economy as foreign investment remained subdued and foreign exchange reserve data indicated potential flight of capital. Domestic banks issued 857.2 billion yuan, or $139.95 billion, worth of new loans in September, overshooting market consensus in a sign that demand for credit is increasing. The September reading beat a median forecast of 750 billion yuan and was substantially higher than August's figure of 702.5 billion yuan. The rebound in new lending is likely to be attributed to China's "targeted" easing launched earlier this year, which included reserve requirements cuts for some banks.
The People's Bank of China data also showed broad M2 money supply surged 12.9% in September from the previous year, in line with market predictions. The central bank also said total social financing aggregate, a broad measure of liquidity in the Chinese economy, was 1.05 trillion yuan in September, against 957.4 billion yuan in August. China's foreign exchange reserves, the largest in the world, declined slightly to $3.89 trillion in September from $3.99 trillion at the end of June.
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