China reserves hit $ 3.2 t; bank lending quickens

Wednesday, 13 July 2011 00:04 - - {{hitsCtrl.values.hits}}

Reuters: China’s foreign exchange reserves soared to a record $3.2 trillion at the end of June, threatening to worsen the country’s inflation headache as bank lending and money growth expanded faster than forecast.

Coming days after data showed China’s inflation hit a three-year peak in June, the $153 billion surge in reserves in the second quarter argued for Beijing to keep monetary policy tight and leave its foot on the credit brakes.

Worried that rising prices could trigger social unrest, Beijing has for months restricted bank lending. But Tuesday’s data suggests demand for loans stayed buoyant, adding to the case for more monetary policy tightening.

Chinese banks extended 633.9 billion yuan in net new local-currency loans in June, up from 551.6 billion yuan in May, the Central Bank said.