By staff reporter Feng Zhe

(Caijing.com.cn) The People's Bank of China, or the central bank, said on Wednesday that new yuan-denominated lending decelerated in October to 253 billion yuan (US$37.04 billion).

The October figure was less than half the 516.7 billion yuan disbursed in September, and also lower than the 368 billion yuan average estimate of 16 economists polled by Caijing.

New lending has returned to more reasonable levels since the third quarter, with the monthly average at about 400 billion yuan, sources close to regulators told Caijing.

Slower lending will help balance the need to continue providing support for the economic recovery while also helping banks control credit risk, they said.

Caijing reported in early November that the big four state-owned commercial banks disbursed 136 billion yuan in October, just over half the total for the month as is usually the case, and a considerably higher proportion than their 21.4 percent share in September.

The return to the traditional structure of lending is the result of a fall in new loans extended by China's urban and rural commercial banks, as well as rural credit cooperatives, which stepped up lending in September.

In mid-October, these banks were banned from extending loans to projects that large- or medium-sized lenders have abandoned or reduced the scale of lending, the sources close to the regulator said.

Regulators have warned banks against rising credit risk as lenders push to extend credit to infrastructure projects under the stimulus package, the sources said, adding that banks have been forbidden to lend to projects without approval or to those that do not comply with the country's industrial or environmental protection policies.

The central bank said that outstanding loans in the form of bill financing fell by 203.9 billion yuan over the month of October. In the fourth quarter, outstanding finance bills are expected to decline by a net 200 billion yuan, China International Capital Corp. said in a report, without elaborating. Banks are likely to extend fewer finance bills next year, the report added.

New loans to households amounted to 157.6 billion yuan in October, comprised of 19 billion yuan in new short-term loans and 138.6 billion in medium- to long-term loans, the central bank said.

In October, loans to corporations increased by a net 95.4 billion yuan. New medium and long-term loans were 272.5 billion yuan, with outstanding short-term loans declining 10.8 billion yuan in the period, and finance bills down by 203.9 billion yuan.

In the first 10 months, new yuan loans totaled 8.92 trillion yuan, up 5.26 trillion yuan from a year earlier, the central bank said. 

Outstanding yuan loans were up 34.19 percent from a year earlier to 39.29 trillion yuan at the end of October, with outstanding yuan deposits totaling 58.69 trillion yuan, up 28.05 percent from a year earlier.
 
1 yuan = 14 U.S. cents

Full article in Chinese: http://www.caijing.com.cn/2009-11-11/110309475.html