China’s central bank said it will use market tools to control lending growth and affirmed a “moderately loose” monetary policy to support the nation’s economic recovery.
The People’s Bank of China will “emphasize the use of market tools instead of quantity controls to guide appropriate growth in money supply and lending” in the second half, Deputy Governor Su Ning said in a statement posted on the bank’s Web site late yesterday.
Shanghai’s benchmark stock index fell for a second day on speculation credit will tighten. China has pushed up money- market rates in open-market operations in the past month and resumed one-year bill sales as policy makers seek to restrict funds for stocks and real-estate investment without derailing a 4 trillion-yuan ($585 billion) economic stimulus plan.
“The market has accepted that it’s only a matter of time before the PBOC takes some serious actions,” said Li Wei, an economist at Standard Chartered Plc in Shanghai. “Everybody knows new loans growth is going to slow in the second half. In the first half, the monetary policy was extremely loose, now the policy has already changed.”
The Shanghai Composite Index slid 1.2 percent as at 11:30 a.m. local time. The benchmark dropped 5 percent yesterday after a report that two of the nation’s biggest banks set ceilings on new loans, spurring concern credit growth will slow. China’s overnight money-market rate rose for the first time in more than a week on speculation the availability of credit is tightening.
Top Priority
The central bank’s statement, which reiterated earlier comments, came hours after the biggest drop in the benchmark stock index in eight months yesterday. Last week, the bank said it would use monetary-policy tools to guide “appropriate” growth in credit, work to control loan risks, and maintain a “moderately loose” monetary policy.
“To continue to foster the relatively smooth and fast economic development is the top priority,” Su said at a recent meeting at the Shanghai branch of the central bank, according to the latest statement. The central bank should “maintain continuity and stability in macro-economic policy and strictly stick to the moderately loose monetary policy,” he said.
China’s credit growth will slow from the “unsustainable” pace seen this year to about 15 percent in 2010 as a strengthening economy reduces the need for loan support, Goldman Sachs Group Inc. said in a note dated yesterday.
Lending Spree
Chinese banks, which advanced a record 7.37 trillion yuan of new loans in the first half, created the equivalent of two Indian banking industries and stoked concerns that loan quality may drop, Goldman Sachs analysts led by Roy Ramos said.
The lending spree, encouraged by the government to support its stimulus package, has also fanned concerns that asset bubbles will form, and prompted the nation’s banking regulator to call on lenders to control the flow of credit several times since last week.
Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the nation’s two largest lenders by assets, aim to cap their new loans at 200 billion yuan in the second half, 21st Century Business Herald reported today, citing people it didn’t identify.
M2, the broadest measure of money supply, rose a record 28.5 percent in June from a year earlier, after a 25.7 percent gain in May. China’s economy expanded 7.9 percent in the second quarter as the nation became the first major economy to rebound from the global recession.
The People’s Bank of China will “emphasize the use of market tools instead of quantity controls to guide appropriate growth in money supply and lending” in the second half, Deputy Governor Su Ning said in a statement posted on the bank’s Web site late yesterday.
Shanghai’s benchmark stock index fell for a second day on speculation credit will tighten. China has pushed up money- market rates in open-market operations in the past month and resumed one-year bill sales as policy makers seek to restrict funds for stocks and real-estate investment without derailing a 4 trillion-yuan ($585 billion) economic stimulus plan.
“The market has accepted that it’s only a matter of time before the PBOC takes some serious actions,” said Li Wei, an economist at Standard Chartered Plc in Shanghai. “Everybody knows new loans growth is going to slow in the second half. In the first half, the monetary policy was extremely loose, now the policy has already changed.”
The Shanghai Composite Index slid 1.2 percent as at 11:30 a.m. local time. The benchmark dropped 5 percent yesterday after a report that two of the nation’s biggest banks set ceilings on new loans, spurring concern credit growth will slow. China’s overnight money-market rate rose for the first time in more than a week on speculation the availability of credit is tightening.
Top Priority
The central bank’s statement, which reiterated earlier comments, came hours after the biggest drop in the benchmark stock index in eight months yesterday. Last week, the bank said it would use monetary-policy tools to guide “appropriate” growth in credit, work to control loan risks, and maintain a “moderately loose” monetary policy.
“To continue to foster the relatively smooth and fast economic development is the top priority,” Su said at a recent meeting at the Shanghai branch of the central bank, according to the latest statement. The central bank should “maintain continuity and stability in macro-economic policy and strictly stick to the moderately loose monetary policy,” he said.
China’s credit growth will slow from the “unsustainable” pace seen this year to about 15 percent in 2010 as a strengthening economy reduces the need for loan support, Goldman Sachs Group Inc. said in a note dated yesterday.
Lending Spree
Chinese banks, which advanced a record 7.37 trillion yuan of new loans in the first half, created the equivalent of two Indian banking industries and stoked concerns that loan quality may drop, Goldman Sachs analysts led by Roy Ramos said.
The lending spree, encouraged by the government to support its stimulus package, has also fanned concerns that asset bubbles will form, and prompted the nation’s banking regulator to call on lenders to control the flow of credit several times since last week.
Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the nation’s two largest lenders by assets, aim to cap their new loans at 200 billion yuan in the second half, 21st Century Business Herald reported today, citing people it didn’t identify.
M2, the broadest measure of money supply, rose a record 28.5 percent in June from a year earlier, after a 25.7 percent gain in May. China’s economy expanded 7.9 percent in the second quarter as the nation became the first major economy to rebound from the global recession.
