China loan growth quickens

Chinese one yuan coins are placed on 100 yuan banknotes in this illustrative photograph taken in Beijing December 30, 2010.

BEIJING (Reuters) - China's banks ratcheted up lending in the last month of 2011 on the back of stronger money supply, reinforcing perceptions that the central bank is gently easing policy to cushion the impact of the global economic slowdown.

Chinese banks extended 640.5 billion yuan ($101.51 billion) in new loans in December, up from 562.2 billion yuan in November, data from the People's Bank of China showed on Sunday.

Annual growth in China's broad M2 money supply accelerated to 13.6 percent in December from November's 12.7 percent.

"The policy easing signal is becoming clearer," said Wang Hu, an economist at Guotai Junan Securities in Shanghai.

"We think the central bank will continue to loosen credit in the coming months."

The surge in bank lending and money supply exceeded market expectations. Analysts had expected 600 billion yuan in new loans for December and annual M2 growth of 12.7 percent in December.

Chinese policymakers have watched Europe's debt crisis with increasing alarm, but have resisted declaring an outright easing in monetary policy. Instead, they have stressed the need to "fine tune" policy, which many analysts say will mean easing of credit restrictions, particularly for small businesses.

In a separate statement on Sunday the central bank reiterated that it intended to maintain a stable monetary policy.

MORE EASING AHEAD?

The stronger-than-expected lending and money supply figures suggested that Beijing is firmly on track to unveil more pro-growth steps as inflation eases, which reduce the risk of a hard landing in the world's second-largest economy.

Contrary to its usual practice, the central bank did not release foreign exchange reserve figures along with money supply and lending data. The bank did not say when those numbers would be released.

Analysts widely expect the central bank to cut the amount of cash that banks must hold as reserves again this month as a way of pumping more loans into the economy.

Beijing cut banks' reserve requirements by half a percentage point on the last day of November, its first in three years.

The move indicated China's central bank is shifting its policy to a pro-growth model, although the central bank continues to label its policy as "prudent," which suggests it is only easing policy gradually as it wants to tame the property sector and also fears that inflation may rebound.

Chinese banks extended a total of 7.47 trillion yuan in new loans in 2011, slightly under the government's undisclosed annual target of 7.5 trillion yuan.

China's once turbo-charged economy is on track to slow for a fourth successive quarter as global demand slackened.

China's annual GDP growth in the fourth quarter may have slowed to 8.7 percent from the 9.1 percent, according to the latest Reuters poll.

Annual inflation is expected to ease to 4.0 percent in December from 4.2 percent in November, according to a poll.

(Additional reporting by Don Durfee; Editing by Jane Merriman)