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China industrial output growth hits 17-month high
by Staff Writers
Beijing (AFP) Sept 10, 2013

China bank lending rises in August: central bank
Shanghai, China (AFP) Sept 10, 2013 - China's bank lending picked up in August from the previous month, central bank data showed Tuesday, but analysts cautioned that credit may still moderate in the coming months.

Chinese banks extended 711.3 billion yuan ($116.2 billion) in new loans last month, the People's Bank of China said in a statement.

That compares with bank lending of 699.9 billion yuan in July.

The August figure is slightly above market expectations of 710 billion yuan, according to a survey of 11 economists by Dow Jones Newswires.

"Overall, we see stable and robust credit growth," Bank of America Merrill Lynch economist Lu Ting wrote in a research report on Tuesday.

"Looking forward, headline new loans... will likely moderate towards year-end," he said, adding lending traditionally slows at that time on seasonal factors.

A cash crunch in June spooked Chinese financial markets and raised worries over slower loan growth.

"Despite concerns of another liquidity squeeze at quarter-end, we believe the chance of a repeat of the June interbank liquidity squeeze is extremely small," Lu said.

"The (People's Bank of China) will do whatever it can to prevent a possible liquidity squeeze," he added.

The central bank ordered lenders to strengthen liquidity management at the height of the crunch and in late July it injected 17 billion yuan to ease shortages in the banking system.

The brief turmoil in June underscored rising concerns over excessive lending by banks and other weaknesses in China's financial system, including opaque non-bank forms of lending, often called "shadow finance".

Analysts believe the government is keen to crack down on excessive lending as it seeks to rebalance the economy away from traditional big-ticket spending and ensure sustainable economic growth.

China's industrial production rose at its fastest in 17 months in August, authorities said Tuesday, the latest in a series of better-than-expected indicators pointing to a pick-up in the world's second-largest economy.

The main gauge of output at China's factories, workshops and mines increased 10.4 percent year-on-year in August, the National Bureau of Statistics (NBS) said, the strongest growth since March 2012.

The finding was ahead of market expectations, with the median forecast in a poll of 11 economists by Dow Jones Newswires predicting a 9.9 percent rise.

Along with other data released Tuesday, the figure is the latest sign that the Chinese economy is gathering momentum after a painful first six months.

"We got a picture of a broad-based recovery from external demand to domestic demand, and from consumption to investment," Bank of America Merrill Lynch economists said in a research note.

"Given the current growth momentum, the Chinese government will surely be able to achieve its 7.5 percent growth target," they added.

Over the first eight months of the year, output was up 9.5 percent on the same period in 2012, the NBS said.

Retail sales, a key indicator of consumer spending, rose 13.4 percent year on year in August, it added, ahead of a forecast of 13.2 percent in the Dow Jones Newswires poll.

The statistic was up 12.8 percent in the first eight months of the year, the NBS added.

Fixed asset investment, a measure of government spending on infrastructure, increased 20.3 percent in the first eight months of the year, the NBS said, a fraction ahead of expectations of 20.2 percent.

The strong figures come on the back of recent government steps to boost sentiment after economic growth eased to 7.5 percent in April-June, from 7.7 percent in the first quarter of the year and 7.9 percent in the final three months of 2012. China's economy expanded 7.7 percent last year, its slowest growth since 1999.

But hopes have been rising recently that the corner has been turned.

On Monday export growth data came in above forecasts in August while the producer price index, which measures goods prices at the factory gate, rose for the first time in six months and after five months of deflation.

And last week the official purchasing managers' index (PMI), a measure of manufacturing activity, also strengthened in August to its highest level in 16 months.

Authorities have so far been reluctant to introduce large-scale stimulus as they aim to move the economy away from dependency on big-ticket investments and more towards consumer demand as the key growth engine.

In late July some supportive measures including reducing taxes on small firms and encouraging railway development were announced.

But despite the upbeat readings for last month, some analysts voiced worries over whether the rebound could endure, saying it depended again heavily on an acceleration in infrastructure investment.

"The dominating role of infrastructure played in the sudden turn-around confirms our concern over the sustainability," said Yao Wei, a Hong Kong-based economist with Societe Generale, in a research note.


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