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Govt fillip to boost bank loans

By Wang Bo (China Daily)
Updated: 2009-03-04 08:03

The central bank said yesterday it would ensure a "reasonable and steady" increase in bank loans this year to support the country's economic growth amid the worsening global financial crisis.

Liu Shiyu, vice-governor of the People's Bank of China (PBOC), said the country will "enhance support to the financial sectors for economic growth."

"We will enhance the 'window guidance' and inform financial institutions of the (right) meaning of the central government's macroeconomic regulation to guide reasonable loan extensions," the central bank said in a statement on its website.

China is expected to face severe challenges as the global financial crisis is still worsening, the statement said.

The central bank has also urged local bank branches to strengthen "window guidance" to ensure ample liquidity to support the country's drive to stimulate economic growth.

In 2008, China's new yuan loans amounted to 4.9 trillion yuan, 1.3 trillion yuan more than that of 2007, with bulk of the lendings for rural area development, small and medium-sized enterprises and reconstruction of quake-hit regions.

China announced a 4-trillion-yuan stimulus package late last year to spur domestic demand and prop up the slowing economy. Bank lending is deemed crucial for powering the sagging economy, which expanded only 6.8 percent year-on-year in the fourth quarter of 2008, down from 13 percent for 2007.

China's new yuan loans reached 1.6 trillion yuan in January, and according to sources, it touched 1.1 trillion yuan in February, much more than the market expectations.

"The lending scale in February has been beyond market expectations. It is reasonable and necessary for getting the economy moving," said Dong Xian'an, macroeconomic analyst, Southwest Securities.

Dong said the new yuan loans for this year could amount to 6 trillion yuan given the growth momentum in the first two months, although they would not remain at such a high level in the coming months.

A report by Haitong Securities said new yuan loans for the whole year could reach 5.5 trillion yuan.