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Banks to hike loans by US$302
billion
BEIJING - China has
set the expected control target of monetary policy
for 2005: narrow money supply (M1) and broad money
supply (M2) will grow 15%, and all financial
institutions will increase RMB loans by 2.5
trillion yuan (US$302 billion).
Comparing
with the target of 17% growth and 2.6 trillion
yuan loan increase for 2004, the target for 2005
is obviously tight, according to experts. However,
considering the actual growth of 14.5% and the
actual loan increase of 2.2 trillion yuan
completed in 2004, China has obviously relaxed the
target for 2005.
According to experts,
China has set the 2005 targets after balancing
three factors: 1) to ensure the economic growth
target for 2005 will be realized; 2) to keep price
stable; and 3) to prevent rebound of fixed assets
investment growth.
Therefore, the target
is moderate, and may bring the potential growth
capacity of the economy into full play on one hand
and maintain comparatively low inflation rate on
the other hand.
A report of Deutsche Bank
even predicts that while M2 maintains a growth of
15%, China's gross domestic product (GDP) may grow
about 8.4% in 2005.
Can China realize the
target?
This will hinge on whether the
newly increased 2.5 trillion yuan loans will be
completed, according to experts. In China, the
private indirect financing makes up over 90% of
total financing. Under such circumstances, money
supply to a large extent hinges on the newly
increased amount of yuan loans. The 14.5% growth
for M2 in 2004 is closely related with the 2.2
trillion yuan loan increase in the year, so was
the 19.58% growth for M2 with the 2.99 trillion
yuan loan increase in 2003.
However,
experts are not optimistic about current credit
growth. The State Information Center Development
Department Director Xu Hongyuan points out that
current bank lending is on a platform of fairly
low growth, with bank lending in some areas
showing signs of over-contraction. The four large
banks, the Industrial and Commercial Bank of China
(ICBC), the Agricultural Bank of China (ABC), Bank
of China (BOC) and Construction Bank of China
(CBC), are even grudging and exceedingly prudent
in granting loans.
In view of the
situation, experts suggest a competent department
of the state fully consider the changes of
operation and psychological expectations of
commercial banks.Bhey note that the inertia of
credit squeeze induced by the change will produce
lagging effects, which may hinder the 15% growth
target from being realized.
Some experts
also point out that whether China will have a
relaxed or tight credit environment will depend on
the control means adopted by the managerial
hierarchy rather than on the growth of money
supply and credit. If China adopts more flexible
means under market principles, the credit
environment as a whole will be more benign and be
conducive to the development of enterprises.
According to Peoples Bank of China
Research Bureau Director Tang Xu, once the
prevalent thinking was that the growth of credit
was incompatible with that of the economy; now,
however, the central bank will urge commercial
banks to increase loans, he said..
(Asia
Pulse/XIC) |
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