Chinese banks' lending likely to rebound slightly

China's banks might have lent some US$95 billion in August, a 14% rise spurred by the government's injection of more money into the reeling Chinese economy.

This massive government lending seeks to stave off a seventh straight quarter of slowdown, which could set the stage for a hard landing in 2013. Banks lent US$85 billion in July, a surprisingly weak lending total that disappointed investors.

Economists polled by Reuters expected Chinese banks to have lent US$95 billion in new loans in August. The modest rebound, if realized, could reassure investors disheartened by the unexpectedly bad economic data in July.

The Chinese government controls monetary policy by telling banks how much and when to lend. Money and credit figures, therefore, are among the most closely-watched data since they reveal policy aims and the state of credit demand.

Business firms aren't expected to boost the demand for loans any time soon since firms are still consuming inventories. Analysts believe a spike in borrowing is unlikely unless the government aggressively loosens policy.

One analyst said the absence of any aggressive loosening in monetary policy and the high gearing ratio of many companies will constrain growth in lending. Beijing has opposed any loosening so far for fear of reigniting consumer and property inflation.