BEIJING - China's commercial banks were more aggressive in lending in August than in July due to a temporary ease in inflation in August, as indicated by data released by the country's central bank on Sunday.

China's new yuan-denominated loans reached 548.5 billion yuan ($85.8 billion) in August, up 9.3 billion yuan year-on-year, the People's Bank of China (PBOC), the country's central bank, said in a statement on its website Sunday.

By the end of August, the outstanding broad money supply (M2), which covers cash in circulation and all deposits, rose 13.5 percent year-on-year to 78.07 trillion yuan, 1.2 percentage points below July's growth and 5.7 percentage points lower than the same period last year, according to the PBOC.

The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, increased 11.2 percent year-on-year to 27.33 trillion yuan, down 0.4 percentage points from July and 10.7 percentage points from August last year.

The M2 growth in the first eight months fell below the target of 16 percent set by the PBOC at the beginning of this year.

Li Zhiqiang, an economist with China Minsheng Banking Corp Ltd, said he is not optimistic about possible policy loosening in the coming months due to lingering inflationary pressure.

China's consumer price index (CPI), a main gauge of inflation, rose 6.2 percent year-on-year in August, down from a 37-month high of 6.5 percent in July, according to data released by the National Bureau of Statistics last Friday.

"On a monthly basis, the August CPI was still 0.3 percent higher than the July data, meaning inflationary pressure remains huge. So it is not easy for policy makers to treat it lightly," Li said.

New lending in August was 55.9 billion yuan higher than those increased loans in July.

"The new loans in August were basically in line with my expectation of 550 billion yuan," said Zhao Qingming, a senior researcher with China Construction Bank, one of the country's largest lenders.

Zhao said lending growth recovered in August because the PBOC noted that medium- and small-sized enterprises had difficulty accessing loans and, therefore, eased its liquidity tightening efforts in the markets.

The accelerated construction of government-subsidized housing units also helped boost the lending increment in August, Zhao said.

According to the PBOC's statement, new yuan-denominated deposits dropped 373.6 billion yuan from August last year to hit 696.2 billion yuan in August.

By the end of August, outstanding yuan-denominated deposits totaled 78.67 trillion yuan, up 15.5 percent year-on-year. The August growth rate was down 0.8 percentage points from July and 4.1 percentage points year-on-year.

Meanwhile, outstanding foreign currencies-denominated deposits stood at $256.1 billion, up 14.5 percent year-on-year.

The continued slowdown in both M1 and M2 growth was a collective result of the central bank's monetary tightening measures in recent months amid rising inflation, said Zhu Jianfang, chief economist of Citic Securities.

Zhu believes the PBOC will be wary of any plans to introduce new tightening measures in the coming months, given economic uncertainty in the United States and the European Union.

"The monetary policy will be steady and the likelihood for an interest rate hike within this year is diminishing," he added.

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