Market watches new loan figures

China's Central Bank also released monetary supply figures for October, which draws a lot of attention. Let's take a closer look at why the market is so concerned about the figure.

Banks extended 253 billion yuan in new loans last month. The figure is less than half of the 516 billion yuan issued in September.

Since the second half of this year, with the gradual recovery of China's economy, the market has suspected that the government will end its moderately loose monetary policy. If the money supply is tightened, the real estate sector, and stock market could see less capital. October figures showed new loans had dropped compared to the previous month, and is being regarded as a direct result of the policy.

The first half of the year saw a continued rise of new loans. But since the second half of the year, the central bank has slowed its credit release. July saw a 77 percent fall in new loans compared to the previous month, causing stock markets to adopt several adjustments.

To quell fears, the central bank reiterated it would maintain its moderately loose monetary policy. In August and September, despite sharp declines compared to the first half of the year, new loans were still issued more than the same period of last year. In October, banks extended less than half of September's credit, but had basically met market expectations.

Lian Ping, Chief Economist of Bank of Communications said "New loans usually drop sharply at the end of the year due to bank policies and market demand. It is usually normal. It is not a signal that monetary policy needs to be tightened."

But as asset prices rise, together with expectations of stronger inflation, investors are concerned that moderately easy monetary policies will soon end. But the signal being delivered seems to say not now.