NEW YORK (MarketWatch) -- Chinese banks made 1.53 trillion yuan in new loans during June, dramatically increasing lending from May levels, official data showed Wednesday.
New loans surged to 1.53 trillion yuan ($223.9 billion) last month, more than double the 664.5 billion yuan in lending seen in May, the People's Bank of China reported on its Web site.
This brings aggregate new lending to date for 2009 to 7.37 trillion yuan, up 201% on a year-over-year basis from the first half of 2008, and well above the official full-year target of 5 trillion yuan, according to Jing Ulrich, managing director of China equities at J.P. Morgan.
"The rapid pace of credit creation has had a stirring impact on China's corporate sector and asset markets, helping to support domestic demand," she said in emailed comments.
China's benchmark Shanghai Composite stock index has rallied 69% this year.
The pace of loan growth should moderate in the coming months, as banks tend to front-load new loans at the beginning of the year, Ulrich said.
However, Ulrich expressed concern about the allocation of bank lending, saying that China's small and medium enterprises continue to be underserved by the formal financial system.
"In the all-important property sector, it is apparent that the abundance of bank credit has propped up some otherwise-distressed developers within an industry due for consolidation," Ulrich said.
"The winning bidders in some recent land auctions have been cash-rich companies from non-real estate sectors, suggesting excessive liquidity," she said.
Surging mortgage loans likely accounted for much of the new lending seen during June. Concerns about potential monetary tightening may have led some companies to borrow at levels exceeding their needs, Ulrich said.
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