BANKS in China extended 703.9 billion yuan (US$111.07 billion) of new local-currency loans in August, the central bank said yesterday, beating market expectations of 600 billion yuan and giving hope that the economy could get a boost from new credit.

The August lending figure, which comes after the central bank’s recent interest rate cuts and quickening government approvals for some infrastructure projects, also marked a sharp increase from 540.1 billion yuan in July.

“The lending number is better than the market expected. That was mainly due to accelerating investment in the real estate sector and the government-backed spending on infrastructure projects,” said Shen Lan, an economist at Standard Chartered in Shanghai.

“However, demand for loans from the corporate sector remains weak as confidence is still lacking. It will take some time for the quickened government infrastructure investment to boost demand in the downstream industries.”

The central bank has cut interest rates twice in June and July and also lowered the proportion of cash banks must hold as reserves by 150 basis points in three steps since November.

But, the rate cuts, the freeing of an estimated 1.2 trillion yuan for new lending by cutting required reserve ratios (RRR) at banks and a raft of tax tweaks have so far failed to halt the slide in economic growth.

The quickening approval of infrastructure investment projects in recent weeks by the National Development and Reform Commission, the country’s top planning agency, may call for the central bank to ease policy further, analysts say.(SD-Agencies)