People across the country continued to withdraw money from banks in July, but the pace of withdrawals has slowed down, the central bank has said.

Household deposits fell by 9.1 billion yuan year-on-year, the People's Bank of China (PBOC) said on its website on Friday.

In June, such deposits increased by 167.8 billion yuan year-on-year after slumping 278.4 billion yuan in May.

The changes have been in line with fluctuations in the stock market, analysts said. In June, for example, the domestic A-share market saw major corrections that scared away many investors.

Yuan-denominated loans rose to 25.31 trillion yuan at the end of July, a year-on-year increase of 16.6 percent, the PBOC website said.

In the first seven months of the year, new bank loans reached 2.77 trillion yuan, more than the authorities' target of 2.5 trillion yuan for the whole of last year.

"It's not surprising as the banks tend to lend more in the first half of the year," China Galaxy Securities chief economist Zuo Xiaolei said. "The growth will slow down in the coming months like last year."

The country's annual growth in broad measure of money supply, M2, grew 18.5 percent in July, the PBOC said. It was 1.42 percentage points higher than in June.

The growth rate has been the fastest this year, intensifying liquidity in the market, analysts said.

"It's better to keep money supply stable, which will be conducive to stable economic growth," Peking University economist Xia Yeliang said.

The accelerated growth is against the monetary authorities' aim to rein in money supply, Xia said. But it is difficult to contain it in a short period.

The PBOC target for this year's M2 growth is 16 percent.

China's trade surplus in July jumped 67 percent year-on-year to reach $24.36 billion. That is the major source of rising money supply, Zuo said.

"The new loans in July have not increased and so the money should have come mainly from trade surplus," she said.

New yuan lending in July reached 231.4 billion yuan, much less than the June figure, which stood at 451.5 billion yuan.

Foreign currency-denominated loans, too, rose in July, to $4.2 billion. They had dropped $800 million in the year-ago period.

Foreign currency-denominated deposits fell by $4.5 billion in July, $3.3 billion more than the the same period of last year.

Zuo attributed the change to people's expectation that the value of yuan would continue to rise because of which they opted less and less for foreign currency deposits.

(China Daily August 11, 2007)