Central Bank Pledges More Loans, Flexible Policy for Farmers

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Last updated at: (Beijing Time) Tuesday, March 12, 2002

Central Bank Pledges More Loans, Flexible Policy for Farmers

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Dai Xianglong, governor of the People's Bank of China, the central bank, said Monday the state-owned banks and the rural credit cooperatives (RCCs) will increase loans and improve services to help farmers earn more.

The banking policy for RCCs will be more flexible this year, allowing floatation of their interests within a certain limit, he said at a press conference during the current session of the National People's Congress.

State-owned banks, mainly the Agricultural Bank of China, will continue to play the important role in supporting rural economic development.

RCCs have become an important component of China's financial system and by the end of 2001, there were more than 40,000 RCCs across the country with deposits and loans amounting to 1.7 trillion yuan and 1.2 trillion yuan respectively, accounting for 12 percent and 11 percent of the total of China's financial institutions, respectively.

RCCs are expected to increase their deposits by 250 billion this year and their loans by about 250 billion yuan by the middle of the year, 100 billion yuan over the record growth of last year.

By the end of this year, the outstanding loans of RCCs are expected to increase by 200 billion yuan, 60 billion yuan more than the growth of last year, the governor said.

While RCCs are encouraged to extend small loans without collateral to the rural households this year, the supervision over them will be strengthened and their ownership will be classified, Dai said.

RCCs are expected to acquire an additional capital of 10 billion yuan, which will put them in a better position to guard against risks.

In addition, he said, RCCs are expected to improve their management of loans, with an aim to bringing down the ratio of non-performing loans by five percentage points.

China to Cut Bank's Non-Performing Loans by 3 Percent Yearly

China will take measures this year to cut the non-performing loans of its state-owned commercial banks by three percent annually, the People's Bank of China, the country's central bank, said Monday.

China to Keep Yuan Stable

China's central bank Monday ruled out the possibility of devaluing the country's currency, Renminbi yuan.

"Keeping yuan stable is beneficial to both China and Asia," said the governor of the People's Bank of China at the press conference.

Conditions Not Ripe for RMB's Total Convertibility

Conditions are not yet ripe for the total convertibility of China's currency, Renminbi yuan, said the central bank governor.

The total convertibility of yuan should be a gradual process, said Dai at a press conference sponsored by the on-going Fifth Session of the Ninth National People's Congress.

The total convertibility of a currency calls for three conditions -- strong national strength, convertibility under capital account, and a stable monetary system. In this regard, Dai said, China does not have the conditions at present.

Central Bank Governor Supports Loans for Housing and Car Purchase

"We encourage commercial banks to provide loans for private purchase of housing and cars," said Central Bank Governor Dai Xianglong.

In reply to a question posed by a reporter from Beijing Youth Daily at a press conference organized by the on-going session of the National People's Congress Monday afternoon, the governor of the People's Bank of China, the central Bank, Dai Xianglong said that the loans provided by commercial banks to private purchase of housing have reached 500 billion yuan and the recent cut in loan interest rates by about 0.54 percentage points could stimulate the use of bank loans in buying housing.

The total loans for private car purchase have also reached 70 billion yuan and the cut of tariffs for car import is expected to stimulate the use of bank loans to buy cars.

The central bank supports not only commercial banks but also enterprise groups and financial companies to offer car loans, Dai said.

The central bank is also working with a set of regulations to encourage foreign auto credit organizations and auto service companies to offer loans for private purchase of cars.

China to Continue Prudent Monetary Policy

China will continue its prudent monetary policy and strengthen financial support to economic growth this year in order to avert possible credit squeeze, said Dai Xianglong, governor of the People's Bank of China, the central bank.

He told the press conference organized by the current on-going session of the National People's Congress Monday afternoon that the anticipated objectives of money and credit supply for 2002 are: Broad money (M2) and narrow money (M1) will both grow about 13 percent, cash in circulation (M0) will not be in excess of 150 billion yuan, and the loans to be provided by all financial institutions will increase by at least 1300 billion yuan.

He stressed the necessity to strengthen credit management in order to safeguard financial security and maintain long-term balance in central finance.

He called on commercial banks, especially those owned by the state, to handle correctly the relations between preventing financial risks and supporting economic development, enhance their sense of capital operations and improve their services.

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