Gradual curb on bank loans 3/12/2004 7:52
Shanghai Daily news
China will gradually curb bank loans to domestic enterprises to prevent a capital crunch in vital economic sectors, a banking official said yesterday.
The country will provide adequate capital to industries that "need further development" while continuing to curb rapid investments in some hot sectors, said Xu Jiayin, head of the loans supervision department at the local branch of the central bank, at 2004 Asian Venture Forum.
"To greatly reduce bank loans regardless of the industries may cause tight money supply to some state enterprises needing government support and create even more bad debts," Xu said during a keynote speech at the two-day conference held in Shanghai.
"But for the overheated sectors, I do not mean there will be any change in the policy because relaxation will probably lead to a rise in investments."
Combined bank loans in China totalled 1.8 trillion yuan (US$216.9 billion) during the first 10 months of this year, down nearly 700 billion yuan from a year ago, Xu noted.
China's economy expanded 9.5 percent for the first nine months, boosted by overzealous investments in roads, bridges and factories by governments, according to the latest quarterly report by the National Bureau of Statistics. Officially the government is aiming for a 7 percent economic growth rate for the year.
Fixed-asset investment, which accounts for almost half of China's economy, rose 27.7 percent during the period.
Roaring investments have caused a surge in raw material prices, clogged transport and led to the shortage of power supply, according to the bureau in an earlier report.
To cool China's overheated economy, the central government raised the amount commercial banks must set aside as reserves three times since last September and reduced the supply of bank loans to the sectors such as steelmaking and real estate.
The People's Bank of China, the central bank, in October raised the benchmark one-year bank deposit and lending rates 27 basis points each to 2.25 percent and 5.58 percent respectively. It was the first rate hike in nine years.
"We are closely monitoring the effects of the macro-economic measures and as far as I am concerned, the government's tighter policies have worked well this year to secure a healthy economy," Xu added.
China's consumer prices rose 4.3 percent in October from a year earlier after climbing 5.2 percent in September. It was the slowest pace in six months as government lending curbs cooled demand and harvests improved, official statistics showed. The bureau will reveal November's figures next Friday.
Meanwhile, M2, the broadest measure of money supply, grew 13.5 percent from January to October, compared with an estimated 14 percent rise for the whole year.
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