China to tighten money, credit in first
quarter '05
BEIJING - There's too
much money floating around in China, too easy to lend
for the wrong investments in the wrong sectors, making
it difficult to cool down overheated sectors of the
still galloping economy.
So, the People's Bank
of China, China's central bank, recently warned 11
joint-stock commercial banks at a joint meeting of
presidents of those banks that next year it will control
money and credit supply mainly in the first quarter -
instead of the fourth quarter, as in the past.
The oversupply of money and lax lending rules
are major problems for China's overheated economy and
Beijing has decided to speed up implementation of
restrictions.
According to Xie Duo, deputy
director of the monetary policy department of the
central bank, since China has tightened its yuan loans,
the inflow of foreign exchange has increased.
Current growth of loans is obviously lower than
that of use of money. The big problem at present is that
commercial banks are not short of money supply for
loans, he said at the recent meeting.
Therefore,
the central bank official predicted that investment as a
whole in China may pick up "rehabilitatively", and so
will prices of capital goods, thus making China's
macro-control policies difficult to implement. The
policies are intended to cool overheated sectors,
including investment, and rein-in the economy.
The central bank is most worried that the
macro-control policy will have to be suspended in 2005
as it was in April-May this year. It does not want to
see sharp increase of loans in the first quarter of
2005.
It is worth noting that loan maturity of
commercial banks has changed greatly. Commercial banks
used to issue large quantities of loans in the fourth
quarter of every year. However, the practice now has
shifted to issuing in the first quarter and calling back
in the fourth quarter.
Meanwhile, the central
bank recently increased the proportion of bill issues,
especially bills with a term longer than half a year,
which will mature for redemption mostly in the fourth
quarter of this year and the first quarter of the next
year.
Deputy director Xie warned that this small
change in maturity structure of bills issued by the
central bank may result in a large change in the
circulating capital of commercial banks in the next
year. The central bank has issued 600 billion yuan
(US$72.5 billion) of bills by now, and the issuance may
exceed one trillion yuan in 2005, Xie predicted.
(Asia Pulse/XIC)
Sep 25, 2004
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