Longer-term lending will increase noticeably in China on demand from the property sector while short-term financing will fall, the central bank said in a report on Friday, showing that it intends to keep credit growth accommodative but more balanced in the coming year.
Chinese officials have recently been voicing more confidence about the economic recovery in a clear rhetorical shift that analysts say presages the end of ultra-loose pro-growth policies but not a drastic shift to tightening. The report by the statistics department of the People's Bank of China lent credence to that view, indicating that it is content to see strong loan growth next year, so long as the money finances investment and not stock-market speculation.
"The demand for loans will remain stable, as projects started in previous months still need big-scale credit support and investment in the real estate sector is accelerating," the report said. This relatively relaxed stance from the central bank could put China in line for at least 7.5 trillion yuan ($1.1 trillion) in new loans next year, said Xing Ziqiang, an economist at China International Capital Corp in Beijing. While less than this year's unprecedented loan surge, that would still be the second most on record.
"This judgement from the central bank hints that it would not adopt monetary tightening or aggressive loan quota controls in the coming quarters," Xing said. A gusher of loans in the first half of this year, when Beijing called on banks to help pull the economy out of the depths of the global financial crisis, has put the country on track for a record 10 trillion yuan in new credit this year.
Short-term discounted bills played a crucial part early in the surge, but officials clamped down on such lending as they grew alarmed that it was being funnelled into the stunning stock market rally at the time. The central bank indicated that there would be no repeat of the bill financing bonanza. "As for the structure of loans, mid- to long-term loans will continue to increase noticeably, while bill financing will continue to decrease," it added.
Separately, Bank of China, the country's biggest foreign exchange lender, said on Friday that lending would remain at a reasonable level in 2010, even if the growth rate slows from this year. China's growth in the third quarter slowed to 8.7 percent from 14.9 percent in the second quarter on an annualised, seasonally adjusted quarter-on-quarter basis, the central bank said in its report.
Far from pointing to slowing momentum, this pace showed that the economy's recovery was on solid ground, as officials have been saying, continuing to build on the sharp rebound from the trough earlier this year. "The Chinese economy is still on the recovery, and the possibility of a double-dip in growth is barely there," said Tang Jianwei, an economist with Bank of Communications in Shanghai.
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