China to Slow Lending Amid Bubble Worries
HONG KONG — The Chinese authorities signaled Wednesday that bank lending would slow significantly this year and reportedly instructed some banks to curb loans — the latest in a series of moves designed to forestall inflation and stave off bubbles in the stock and property markets.
Liu Mingkang, chairman of the China Banking Regulatory Commission, said he expected the nation’s banks to extend loans totaling about 7.5 trillion renminbi, or $1.1 trillion — down nearly 22 percent from the record 9.6 trillion renminbi doled out last year.
“This year we will continue to control the pace and demand of the credit supply,” Mr. Liu said at a conference in Hong Kong, The Associated Press reported. He added that regulators were paying special attention to loans for local government projects and real estate. All banks, he added, had been ordered to “heighten their vigilance against an impossible, embedded credit risk.”
Stock markets in China and Hong Kong fell on the news. The Shanghai composite index, the main gauge of the mainland Chinese market, ended 2.9 percent lower, while the Hang Seng index in Hong Kong dropped 1.8 percent.
Bank of China and China Construction Bank sagged 3.4 percent and 3.1 percent, respectively, in Hong Kong, while Industrial and Commercial Bank of China fell 2.6 percent.
Still, economists said that the Chinese policy makers’ signal was neither surprising nor dramatic and that it showed Beijing “tapping on the brakes,” rather than engineering a major policy reversal.
“The 7.5 trillion renminbi target for this year is hardly an insignificant amount by anyone’s definition,” said Patrick Bennett, a strategist at Société Générale in Hong Kong, adding that he believed the market reaction had been excessive.
“Bank lending has apparently been strong in the first weeks of the year, and the recent policy moves and announcements are clearly designed to deal with that at an early opportunity,” Mr. Bennett said.
Separately, the official China Securities Journal cited unidentified banking sources Wednesday as saying that some banks had been told to stop all lending for the rest of the month.
A huge government stimulus package worth 4 trillion renminbi, coupled with the spree of easy credit as the country’s state-owned banks were instructed to lend freely, helped China stave off a sharp economic slowdown last year.
China is due to report Thursday on its gross domestic product, and the numbers are expected to show that the economy grew 10.5 percent during the last three months of 2009, compared with a year earlier, according to economists polled by Bloomberg News — a remarkable pick-up from earlier in the year.
The easy cash has helped drive a rapid rise in China’s stock and property markets, while fueling concerns that some of the loans extended by eager banks may ultimately turn sour.
Overall inflation also has been on the rise as the Chinese economy has picked up speed, adding to the pressure on the authorities to temper economic activity and thus quash price increases.
Zhu Baoliang, chief economist for the State Information Center and a senior government official, said Wednesday that Chinese consumer price inflation had accelerated “significantly” in December and was likely to average 3 percent this year, Reuters reported.
At the same time, exports, a main driver of China’s economic growth, rebounded more quickly than expected at the end of last year, giving the authorities more leeway to unwind some extraordinary economy-bolstering measures.
In another recent action to scale back lending, the Chinese central bank ordered state-owned banks last week to set aside a bigger share of their deposits as a reserve against failed loans — 16 percent for larger banks, half a percentage point more than before. Smaller banks’ reserve requirements were raised to 14 percent from 13.5 percent.
Numerous China-watchers had long projected “administrative” policy moves of this kind, though many had expected Beijing to hold off until the second quarter of this year. The resurgence in exports and a glut in lending at the start of this year appears to have persuaded them to move sooner.
The central bank also edged up the rate on an often-watched interbank loan this month after keeping it steady for five months, and it raised the rate on its one-year bills.
Analysts also expect China to start gradual increases in the benchmark lending rate — a more sweeping policy tool — though that is not expected until the second half of this year.
So far, only a handful of countries — Australia and Norway among them — have begun to nudge up interest rates as their recoveries have taken hold.
nytimes.com |
