China's new yuan loans surge

CNC report from Beijing
Added On April 13, 2013

China's new yuan loans better estimates and jump to more than 1 trillion yuan, or 170 billion U.S. dollars, in March.

Analysts predict the country's central bank will soon tighten credit as possible hot money flows in.

The People's Bank of China said on Thursday new local-currency lending rose to 400 billion dollars in the first quarter of 2013.

The broad measure of money supply (M2) also rose 15.7 percent by the end of March, exceeding the 13-percent goal set by the Chinese government last month.

Meanwhile, China's funds outstanding for foreign exchange have been climbing for three consecutive months, piling pressure on the central bank to draw back liquidity.
 
Analysts say the central bank will definitely tighten credit and China's monetary policy has been turning from loosening to neutral.
      
Inflows of foreign capital may also prompt the central bank to dampen the credit.

Quantitative easing in the U.S. and inflationary policies in Japan inject huge funds into the global market while holding down yields on investment in developed economies.

Therefore, hot money is rushing to emerging countries, especially to China where the local currency remains strong.

Fitch Ratings downgraded China's yuan-denominated debt on Tuesday, saying risks over China's financial stability have grown.
  
As non-bank lending makes up half of China's total financing, stricter regulation over "shadow" banking could aggravate credit tightening.