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China January Lending Grew Less Than Estimated Amid Holiday

Feb. 10 (Bloomberg) -- China’s new lending grew less than estimated in January as the weeklong Lunar New Year holiday left financial institutions with fewer working days to grant credit and the central bank refrained from cutting reserve requirements.

Banks extended 738.1 billion yuan ($117 billion) of new yuan-denominated loans last month, according to data released by the People’s Bank of China today. That compares with the median forecast of 1 trillion yuan in a Bloomberg News survey of 26 economists and 641 billion yuan in December.

The lowest January lending in five years may bolster the case for Premier Wen Jiabao to ease monetary policy to counter cooling overseas demand and slumping property transactions at home. Officials have pledged in the past month to boost credit support for smaller businesses, major government-backed investment projects and affordable-home construction this year.

“Companies remain hesitant to borrow amid the uncertainties in economic outlook, and fewer working days in January this year also affected lending,” Ken Peng, a Beijing-based economist at BNP Paribas SA, said before today’s release. “The central bank may also want to prevent the usual explosion of January lending in order to signal its prudence even though the market is widely expecting further policy easing.”

Peng estimates new bank lending will rise to 8 trillion yuan this year from 7.5 trillion yuan last year.

Decade Low

China’s New Year holiday, which ran from Jan. 22 to Jan. 28 this year, distorts monthly data in the first two months of the year. Such holiday effects “may have masked the real trend in the economy” and policy makers may adopt a “wait-and-see” stance until the seasonal factors fade, Peng said.

M2, the broadest measure of money supply, expanded 12.4 percent in January from a year earlier, the lowest in more than a decade. It gained 13.6 percent the previous month.

Historical data show that banks grant more loans at the beginning of the year.

The central bank is allowing the nation’s five biggest lenders, including Industrial & Commercial Bank of China Ltd., to increase first-quarter lending by a maximum of about 5 percent from a year earlier, two people at state lenders said last month.

The central bank surprised markets by refraining from cutting banks’ reserve requirements before the holiday. It has instead added liquidity to the financial system through reverse-repurchase contracts and the suspension of weekly bill sales.

A report this week showing inflation in January accelerated for the first time in six months may further delay a reduction in reserve ratios, economists at China International Capital Corp. wrote in a report yesterday. Improved interbank liquidity and a better-than-forecast reading for the January purchasing managers’ index may also explain the central bank’s stance, according to analysts led by Peng Wensheng.

China today reported a $27 billion trade surplus in January, the biggest in six months. The inflow of funds may also add to domestic liquidity, according to Joy Yang, an economist at Mirae Asset Securities Ltd. in Hong Kong.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at

To contact the editor responsible for this story: Paul Panckhurst at

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