PBOC to maintain prudent monetary policy

China's new bank lending slowed more than expected in December while growth of broad money supply eased, according to the data released by the central bank at today's press conference.

For the month of December, Chinese banks made 482.5 billion yuan worth of New Yuan Loans, lower than forecast of 600 billion yuan. For the whole of 2013, New bank loans rose 8 percent from the previous year to 8.89 trillion yuan. The rate of expansion slowed modestly from 10 percent in 2012.

The M2 supply, the broadest measure of money supply rose 13.6 percent last month from a year earlier, down from November's 14.2 percent rise. Going forward, the PBOC plans to maintain its neutral monetary policy stance with fine tuning.

"We will continue to implement prudent monetary policy this year and make appropriate fine-tuning and pre-emptive adjustments in policy to make monetary conditions not too tight or too loose to create a good environment for steady economic growth." Sheng Songcheng, Dept. Head of Financial Survey & Stats, PBOC said.

Analysts also expect the Chinese authorities to step up monitoring on the growing shadow banking sector. The long-term deleveraging drive aims to ensure the sustainability of China's economic growth.

"The central bank will actively guide shadow banking activities to support the real economy while heading off potential risks.. We will increase monitoring and analysing shadow banking statistics to contain its risks." Sheng Songcheng said.

The central bank also said China's total social financing aggregate, a broad measure of liquidity in the economy, grew 9 percent from the previous year to 17.3 trillion yuan. The growth slowed sharply from 23 percent in 2012. Some say this slow down in growth rate supports the view that the central bank has been targeting shadow banking.