New Chinese loans in another sharp drop

Chinese banks could have lent only US$95 billion in new loans during September.

This is a steep plunge of 18% from actual loans in August that surprised even analysts who had expected tepid loan growth.

These analysts had predicted loans to improve to US$119 billion. They point out that the US$95 billion was a sharp fall from August when net new loans stood at US$112 billion.

They suspect, however, that most of these new loans were short-term loans instead of the medium- to long-term loans essential to drive China’s growth out of its current deceleration.

Chinese banks are also being weakened by an almost weekly liquidity crunch in recent months that forced the People’s Bank of China to inject massive amounts of money to provide temporary liquidity support.