Loan target overshot, more curbs to come

08:53, January 12, 2011      

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The government overshot its bank loan target in 2010 and finished the year with money growth still running too fast, underscoring the need for more decisive policy tightening to keep inflation in check.

At the same time, a record $199 billion surge in foreign exchange reserves in the fourth quarter pushed China's stockpile, already the world's biggest, to $2.85 trillion, highlighting that money streaming in from abroad was complicating policy efforts at home.

Domestic banks issued 7.95 trillion yuan ($1.20 trillion) in new loans last year, the central bank said Tuesday, more than the 7.5 trillion yuan ($1.13 trillion) that the government wanted for the full year.

The broad M2 measure of money supply grew 19.7 percent, also topping the official target of 17 percent.

"Lending is still excessive and China's process of monetary normalization has not finished yet," said Wu Tujin, an economist with Guosen Securities in Shenzhen.

"That means China will still face high pressure from inflation and asset bubbles," said the economist with Guosen Securities

More than just an economic issue, high-speed money and credit growth has become a political concern, helping propel Chinese consumer inflation to its fastest in more than two years.

Determined to rein in rising prices, a source of public discontent, the government declared late last year that it would shift to a tighter monetary policy stance.

Source: Global Times
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