China’s property prices snapped 15 months of gains and bank lending eased in June, indicating that curbs on credit may diminish inflation pressures even as record exports support growth.

Real-estate prices in 70 cities fell 0.1 percent from the previous month, the statistics bureau said in Beijing today. New lending of 603 billion yuan ($89 billion) was the least in three months, the central bank said in a report yesterday.

China’s economic growth for the April to June period, due to be announced on July 15, may have topped 10 percent for a third straight quarter, a Bloomberg News survey of economists shows. Sustaining the expansion of the world’s third-biggest economy may be harder in the second half as a real-estate slowdown damps construction, local-government investment faces constraints, and austerity measures in Europe cool export demand.

“China’s second-quarter growth likely remained strong, but exports, infrastructure investment and the property market face downside risks,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. Easing price pressures may leave officials room to “loosen some policies, particularly in the fourth quarter, to sustain growth,” Shen said.

China’s June exports climbed a more-than-forecast 44 percent to $137 billion, customs bureau data showed July 10, signaling that, so far, global demand has withstood Europe’s sovereign-debt crisis.

Property Price Cuts

Property prices climbed 11.4 percent from a year earlier, the statistics bureau said, compared with a record 12.8 percent increase in April. Price cuts by China Vanke Co., the nation’s biggest listed developer, have been among signs the market is cooling as the government cracks down on speculation.

The Shanghai Composite Index climbed 0.8 percent as of 10:26 a.m. local time amid speculation that the government could relax curbs on mortgage lending.

Harvard University professor Kenneth Rogoff said July 6 that a “collapse” in real estate is beginning, while Barclays Capital forecasts prices may fall as much as 30 percent in the next 12 months.

Restraining price pressures is one of Premier Wen Jiabao’s key goals after lenders flooded the economy with cash from late 2008 to drive the nation’s rebound from the global financial crisis. Weaker money-supply growth may make that task easier. M2, the broadest measure, expanded 18.5 percent in June, the least since December 2008, the central bank said.

Currency Reserves

Meantime, China’s foreign-exchange reserves had their smallest quarterly gain since 2001, climbing $7.2 billion to $2.454 trillion, the report showed.

Consumer prices may have climbed 3.3 percent in June, the most in 20 months, according to the survey of analysts ahead of this week’s announcement. That number will be boosted by the comparison with a year earlier, when prices were falling.

Inflation may peak at 4 percent this month, then slow for the rest of the year, according to state economist Zhu Baoliang, the Shanghai Securities News reported today.

The government may loosen this year’s 7.5 trillion yuan new-lending quota for banks in the fourth quarter, when a slowdown in inflation will be “well established,” Morgan Stanley said in a report today.

Customs officials, while hailing a recovery in exports to pre-financial crisis levels, said Europe’s debt woes and the “sharp decline” in the value of the euro have started to affect sales to that region. At home, the Chinese government is grappling with risks including the danger that bad loans will pile up from an explosion in local-government borrowing.

The China Banking Regulatory Commission estimates that outstanding loans to funding vehicles set up by local governments rose 70 percent to 7.38 trillion yuan at the end of 2009 from a year earlier. The State Council has ordered tighter controls. – Bloomberg