China's bank loans double in January to $237 bln

Chinese banks extended a record 1.62 trillion yuan ($237 billion) in loans in January, more than double the year before, as lenders heeded government calls to loosen credit controls to help revive the economy.

Total bank loans rose by 814.1 billion yuan ($119 billion), nearly 104 percent over lending in January 2008, when the government was still imposing stringent curbs on credit as it battled inflation, the People's Bank of China reported Thursday.

Facing an abrupt slowdown due to plunging demand for China's exports, regulators have sought to boost liquidity after years of trying to rein in lending.

Banks made 771.8 billion yuan ($113 billion) in new loans in December, figures show, up nearly 15 fold over the same month a year before, when credit was at a virtual standstill due to the credit controls.

China's banks are in relatively good shape, with less exposure than most of their global rivals to the toxic mortgage-related securities that have wrought havoc in the global financial system.

The government has ordered them to make credit available to help battle the downturn which hit last fall. But with many industries facing overcapacity and demand slowing for many products, analyst warn the state-owned banks risk letting policy, rather than profitability, guide their lending decisions.

Analysts said the structure of lending in January, with short-term financing accounting for two-thirds of the total, does not bode well for a sustained expansion.

The trend suggests that demand for "attractive project finance is still insufficient to absorb excess bank liquidity, leaving banks to still pursue low risk, low return businesses in large scale," Citigroup Global Markets economist Ken Pang said in a report issued Thursday.

"If the short term credit expansion slows as we expect, broad credit growth would probably fall with it," he said.

On Wednesday, leaders announced fresh help for the shipbuilding industry, following similar moves to boost automakers, airlines, textile exporters and other key industries.

Customs data released Wednesday showed that trade plunged in January, with exports falling 17.5 percent from a year earlier and imports sinking 43 as factories bought less foreign raw materials and consumer demand weakened.

Like other major economies, it's evident that China is busy printing money: bank customers these days often get fresh bills when making withdrawals.

The central bank reported that China's M2, its broadest measure of money supply covering cash in circulation plus all deposits, rose nearly 19 percent in January from a year earlier to 49.61 trillion yuan ($7.2 trillion).