Credit growth in Hong Kong picked up again in the second quarter on the heels of tightening liquidity on the mainland, which also saw some yuan deposits flowing out of the city. Total loans and advances in the city rose 3.3 per cent in June, the fastest growth since September 2010. Data from the Hong Kong Monetary Authority (HKMA) showed loans for use in Hong Kong, including trade finance, grew 3.1 per cent in June from the previous month while loans for use outside Hong Kong rose 3.9 per cent. The Hong Kong dollar loans-deposit ratio climbed to 83.7 per cent from 81.6 per cent in May. On a quarterly basis, loans used in Hong Kong grew 7.1 per cent in the second quarter compared with 2.9 per cent in the first. An HKMA spokeswoman said the spike was led by trade finance, loans for building, construction, property development and investment, wholesale and retail trade. The authorities have been alarmed at the rapid growth of credit in the second quarter. The HKMA ordered banks to step up credit control measures to manage risks. Market-watchers said they expect loans to grow more slowly in the third quarter because of the combined effect of HKMA measures and rising borrowing costs. "Tightened liquidity on the mainland in the last quarter and lower lending rates in Hong Kong have been causing many mainland firms to borrow in the city," said a bank executive who did not want to be identified. Meanwhile, yuan deposits in Hong Kong edged down 0.1 per cent to 698 billion yuan as of the end of June, after rising for eight straight months. Mainland banks increased their deposits rates to attract liquidity at the end of June to balance the books. That caused an outflow of yuan from the city, said people familiar with the situation. Mainland and Hong Kong banks have since slashed their yuan deposits rates.