Yuan supply growth exceeds estimates

China’s December lending and money supply growth exceeded economists’ estimates, signaling monetary conditions may be easing as the nation’s central bank said it must be prepared for possible shocks from the US and Europe.

New loans totalled 640.5 billion yuan ($101 billion) for the month, exceeding the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 per cent, compared with the 12.9 per cent median of 18 estimates.

People’s Bank of China Governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain US economic outlook, echoing comments by Premier Wen Jiabao.

 

The central bank will “very likely” follow up last month’s reduction in lenders’ reserve requirements with another cut this week, JPMorgan Chase & Co. said on Monday.

“This is better-than-expected monetary data, suggesting monetary conditions have started to ease,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd., who previously worked at the World Bank. Liu said he expects that the central bank may cut the reserve requirement again before the Lunar New Year on January 23. “Such easing will help ensure a soft landing for the Chinese economy,” he said. The statement posted to the central bank’s website yesterday didn’t contain a figure for China’s foreign-exchange reserves, which are usually released with lending and money supply data issued at the end of each quarter.

Stocks in China rose. The Shanghai Composite Index was 1.5 per cent higher.