Chinese banks told to curb lending after concerns of overheating
Financial Express, January 21, 2010, Page 20
Bloomberg, Shanghai, Beijing
Chinese authorities ordered some big banks to curb lending for the rest of January, intensifying their efforts to prevent the world’s third-largest economy from overheating.
The news on Wednesday weighed down stocks in Asia and Europe and oil fell toward $78 a barrel on fears that demand in China, the world economy’s main source of growth, may now slow down as authorities tighten policy.
China’s central bank told some banks, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources told Reuters.
A surge of new lending in January has triggered a series of intensifying steps by authorities to rid the financial system of excess cash that can fuel inflation and asset bubbles. Last week, the central bank raised bank reserve requirements for the first time since June 2008. “The question now is not whether we need to control credit and money supply but when and how to control it,” said Chen Xingdong, chief China economist at BNP Paribas in Beijing. “Policy will not be a straight line.”
Chinese banks lent 1.1 trillion yuan ($161 billion) in the first half of January, sources said, citing central bank data. That puts total new loans in January on track for the highest since June 2009, when banks doled out 1.5 trillion yuan in new lending.
The top four banks together lent more than 500 billion yuan during the same period, the sources said. Last year, Chinese banks lent a record 9.6 trillion yuan. The surge, combined with Beijing’s 4 trillion yuan stimulus plan, helped kick-start the economy after a slump, but aroused investor fears of overheating. Data due on Thursday is expected to again show double-digit quarterly GDP growth.
Zhu Baoliang, chief economist at a government think tank, said consumer inflation has accelerated a lot in December and would likely push policymakers to raise interest rates by the middle of the year. There were conflicting accounts of what exactly authorities would do. The official China securities journal cited unidentified banking sources as saying that some banks had been told to stop all lending for the rest of the month. However, a source at the China Banking Regulatory Commission, who spoke on condition of anonymity, said the CBRC had not ordered banks to halt lending for the rest of January, though it continued to crack down on lenders that do not meet criteria.
“It is our long-standing principle that banks that do not meet regulatory requirements must not lend any more,” the source said. In any case, after last week’s increase in bank reserve requirements, a rise in 1-year bill yields, and steps to root out speculation in the property market, the message from authorities is clear: fast growth in credits and money supply will not be tolerated because the stakes are too high.
Financial Express, January 21, 2010, Page 20
Bloomberg, Shanghai, Beijing
Chinese authorities ordered some big banks to curb lending for the rest of January, intensifying their efforts to prevent the world’s third-largest economy from overheating.
The news on Wednesday weighed down stocks in Asia and Europe and oil fell toward $78 a barrel on fears that demand in China, the world economy’s main source of growth, may now slow down as authorities tighten policy.
China’s central bank told some banks, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point, banking sources told Reuters.
A surge of new lending in January has triggered a series of intensifying steps by authorities to rid the financial system of excess cash that can fuel inflation and asset bubbles. Last week, the central bank raised bank reserve requirements for the first time since June 2008. “The question now is not whether we need to control credit and money supply but when and how to control it,” said Chen Xingdong, chief China economist at BNP Paribas in Beijing. “Policy will not be a straight line.”
Chinese banks lent 1.1 trillion yuan ($161 billion) in the first half of January, sources said, citing central bank data. That puts total new loans in January on track for the highest since June 2009, when banks doled out 1.5 trillion yuan in new lending.
The top four banks together lent more than 500 billion yuan during the same period, the sources said. Last year, Chinese banks lent a record 9.6 trillion yuan. The surge, combined with Beijing’s 4 trillion yuan stimulus plan, helped kick-start the economy after a slump, but aroused investor fears of overheating. Data due on Thursday is expected to again show double-digit quarterly GDP growth.
Zhu Baoliang, chief economist at a government think tank, said consumer inflation has accelerated a lot in December and would likely push policymakers to raise interest rates by the middle of the year. There were conflicting accounts of what exactly authorities would do. The official China securities journal cited unidentified banking sources as saying that some banks had been told to stop all lending for the rest of the month. However, a source at the China Banking Regulatory Commission, who spoke on condition of anonymity, said the CBRC had not ordered banks to halt lending for the rest of January, though it continued to crack down on lenders that do not meet criteria.
“It is our long-standing principle that banks that do not meet regulatory requirements must not lend any more,” the source said. In any case, after last week’s increase in bank reserve requirements, a rise in 1-year bill yields, and steps to root out speculation in the property market, the message from authorities is clear: fast growth in credits and money supply will not be tolerated because the stakes are too high.
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