Bank credit expected to remain reasonably adequate

16:34, April 14, 2010      

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China's new RMB-dominated loans totaled 2.6 trillion yuan in the first quarter of 2010, dramatically lower than the 4.6 trillion yuan of new loans during the same period of 2009. However, the first-quarter new loans of 2.6 trillion yuan still stood at a record high. The bank credit is expected to remain reasonably adequate in the future because of the real economy's strong demand for funds.

Reasonably moderate

"The rise in bank loans in the first two months was excessively fast. Compared with the nearly 1.9 trillion yuan of new loans issued in March 2009, the amount of 500 billion yuan of new loans in March 2010 was considerably lower and reasonably moderate," said Zhuang Jian, a senior economist with the Beijing Office of the Asian Development Bank (ADB).

Generally, the amount of new loans in the first quarter tends to determine the size of new loans for the entire year. China's new loans in the first quarter of 2009 reached almost 4.6 trillion yuan, accounting for over 45 percent of the total in 2009.

The overly-high percentage of loans issued in the first quarter caused an imbalanced downward trend for the credit growth in 2009. In response, the central bank and the China Banking Regulatory Commission issued regulation guidance in the second half of 2009 in order to secure balanced loan issuance throughout the year.

The central bank also pointed out in its first-quarter financial report that the reasonable credit growth in China has further reinforced the economic recovery trend.

Demand for funds

Analysts believe that the current reasonable credit growth indicates a strong fund demand from market participants. In addition, despite the decline in both the broad measure of money supply, M2, and the narrow measure of money supply, M1, they still remain at a high level and have helped the financial market to reasonably support the economy.

"In addition to some infrastructure projects launched last year, we also noticed the increasingly active rebound of manufacturing enterprises since the beginning of this year," said Lian Ping, an economist with the Bank of Communication. “Furthermore, the real estate market continues toward an upward trend. All of these factors will result in active demand for credit funds."

Liu Yuhui, an expert from the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said the numbers for this year are acceptable overall.

"We should not forget the relatively high base numbers for 2009 despite the fact that the growth rates of the M1 and M2 are now on the decline compared to last year,” Liu said. “At present, the credit growth is at a record high, which can sustain the capital needs of Chinese enterprises."

Bank loans will not contract noticeably

As for future increase in the credit capital, experts hold that the credit capital scale will not contract noticeably in the short term due to the moderately loose monetary policy.

The Monetary Policy Committee at the People's Bank of China recently held a regular conference for the first quarter of this year. The conference urged a relatively balanced supply of bank loans, posing a subtle difference with the previous wording of "balanced supply of bank loans."

Market participants hold that the word "relatively" means that the China Banking Regulatory Commission will not resort to excess mechanical regulation and control, as it will take China's economic security into consideration.

"Sharp declines in credit growth will without a doubt hurt the recovering economy. The projects based on last year's 4 trillion yuan of investments and the rebound of the manufacturing industry requires abundant bank loans," Lian said.'

People's Daily Online


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