Chinese money growth and loans slow

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Chinese money growth and loans slow

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The amount of money entering the Chinese economy slowed to its lowest level in two and a half years in May.

Official figures showed that China’s banks also made fewer new loans than expected.

The Beijing government has been putting up interest rates and increasing the amount the banks must hold in reserve to cool the economy.

The policy is likely to continue to tackle stubborn inflation.

“We continue to look for one more interest rate hike in June and believe it is too early to loosen policy,” said Jian Chang at Barclays Capital in Hong Kong, while noting there was a chance the rate increase could be delayed until July.

The timing of the next rate rise could well depend on May’s inflation data due to be released on Tuesday.

Analysts polled by Reuters predicted annual inflation edged back up to 5.4 percent in May, the highest in more than 30 months, and a government researcher said in remarks reported on Sunday that it may accelerate to more than six percent in June.

To quell inflation, China has raised interest rates twice and increased banks’ required reserves five times this year. It has also ordered banks to cut lending to local governments and property firms.