CHINA’S CENTRAL bank has told the heads of the largest state-controlled institutions to slow the pace of new lending, after new loan volume in the first half tripled against last year’s period, according to sources.
The pressure from the People’s Bank of China (PBoC) signals an unstated shift in policy and comes as it steps up its open-market operations to control liquidity.
Over the past two weeks China’s leaders emphasised adherence for now to its policy of “moderately loose” monetary conditions.
While there has been no formal change to what is an extremely loose monetary policy, the central bank and regulators have signalled an intention to rein in excessive lending through various policy announcements.
The PBoC raised interest rates recently on its weekly sales of short-term bills in the interbank market and has ordered the most profligate lenders to buy set amounts of special low-interest, one-year central bank notes, increasing pressure on banks to toe the line.
Dorris Chen, an analyst with BNP Paribas, said: “The central bank is being forced to tread a fine line between forestalling a serious credit bubble and maintaining the overall easy monetary policy.” – (Copyright The Financial Times Limited 2009)
