* Loans, money supply stronger than expected
* June new loans 1.08 trln won vs 915 bln forecast
* Total social financing also sharply up from May
* Adds to signs economy may be steadying, turning the corner
* C.bank seen loosening monetary conditions to support
(Adds details, quotes)
By Aileen Wang and Kevin Yao
BEIJING, July 15 Beijing stepped up efforts to
re-energise China's economy in June and avert a sharper
slowdown, pumping more money into the system and pressing banks
to extend more loans, but analysts say more stimulus will be
needed to ensure a sustained recovery.
Data over the last week offered some signs that the world's
second-largest economy steadied in the second quarter as a raft
of government stimulus measures kicked in, though exports
remained sluggish, putting greater pressure on Beijing to stoke
A cooling property market also points to continued risks in
the second half and could well determine the scope and extent of
further policy easing, after Premier Li Keqiang vowed recently
that the economy would grow by at least the targeted 7.5 percent
rate this year.
Chinese banks, which are used by Beijing as a policy tool,
made a much stronger-than expected 1.08 trillion yuan ($173.9
billion) of new yuan loans in June, nearly 20 percent more than
market expectations, data on Tuesday showed.
Broad M2 money supply jumped 14.7 percent last month from a
year earlier - the highest in 10 months, the People's Bank of
China said in a statement on its website, also higher than a
forecast of 13.5 percent in a Reuters poll of economists.
"While a fall in short-term lending rates hinted at a higher
supply of funds during the month, the money swirling in the
market reflects the urgency of the authorities to ramp up
economic activity," said Chester Liaw, an economist at Forecast
Pte in Singapore.
Outstanding yuan loans grew 14 percent from a year ago,
slightly better than expectations, while the total social
financing aggregate, a broad measure of liquidity in the
economy, swelled to 1.97 trillion yuan in June from 1.4 trillion
yuan the month before.
"We had previously expected aggregate financing to come in
much higher, but still the 1.97 trillion yuan printed as a major
upside surprise," Liaw said.
The central bank has pledged to keep credit and money supply
growth at a reasonable level to meet the needs of the real
economy. It aims for a 13 percent annual rise in M2 this year.
The strong growth in money supply in June "is an explicit
loosening of (monetary) conditions. Some of this is seasonal. At
the end of the quarter there was demand for cash. And evidently,
the authorities supplied it," said Tim Condon, economist at ING
Bank in Singapore.
But other economists were more cautious.
"We believe that June's rebound in credit growth has more to
do with a weak base for comparison due to the cash crunch last
year than with the current policy stance," Julian
Evans-Pritchard, China economist at Capital Economics, said in a
UPBEAT ON EXPORT OUTLOOK
After a shaky start to the year, China's economy has
recently shown signs of turning the corner thanks to a series of
government stimulus measures, including reserve requirement cuts
for some banks and more spending on railways and public housing.
Government spending surged 26.1 percent in June from a year
earlier to 1.65 trillion yuan, further reflecting Beijing's
determination to revive growth momentum.
However, many economists stress that the rebound looks
patchy and believe more policy support may still be needed to
counter the broader economic downdraft from the slowing property
China's Commerce Ministry said on Tuesday that export growth
should show marked improvement in the second-half of the year
compared to the first six months, making it likely that China
will achieve its 7.5 percent trade growth target for 2014.
"Our surveys on exporters showed that export firms are
showing confidence on trade growth. Therefore, we expect both
export and import growth will improve remarkably in the second
half than that in the first half," Shen Danyang, ministry
spokesman told reporters at the monthly briefing:
"If stripping off last year's high base effect of abnormal
trade growth, I think we are able to achieve the 7.5 percent
annual trade growth target in 2014 through efforts."
China's trade performance improved in June but still missed
market forecasts, while cooler-than-expect inflation readings
pointed to lingering sluggishness in the economy.
China's foreign direct investment inflows rose at an annual
pace of 2.2 percent in the first six months and were up only
modestly for June, reflecting investors' cautiousness over the
The government is due to release second-quarter GDP growth
on Wednesday, along with data on fixed-asset investment for the
first half and factory output and retail sales for June.
Economists polled by Reuters expected annual GDP growth of
7.4 percent in the second quarter, matching the 18-month low in
the first quarter, though Premier Li said last week that growth
had improved in April-June.
($1 = 6.2103 yuan)
(Reporting by China economics team; Editing by Kim Coghill)