Economy

Chinese Central Bank Advises to Moderate January lending Pace

As per some internal sources, Chinese Central Bank, People Bank of China has urged some commercial banks in January to moderate their pace of lending, as it aims to manage the amount of credit flowing into the economy.

In its guidance, the Chinese Central Bank also told the lenders that the pace and size of loans granted should not fall below the level from the same period a year earlier.

Usually, loan growth of China in January remains strong as Chinese banks tend to front-load loans early in the year to win market share.

At the same time, the Chinese Central Bank is providing adequate liquidity to the market and has been urging banks for months to keep lending to cash-strapped companies, notably smaller, private firms.

As per analysts, the key will be to revive weak credit growth to steadying China’s cooling economy, but policymakers are closely watching to ensure loans are used for the real business activity, not speculation.

“The (loan) injection was too much, and (we) need to tap on the brakes,” said one of the sources close to the central bank.

Excessive growth in loans never conforms to sufficient credit demand in the real economy, and excess expansion in granting loans could lead funds to flow into undesirable areas, said an analyst.

Another source of the news said, “(We) got the notice by phone. Credit lending was indeed robust, given there are certain regulatory requirements.”

However, the People’s Bank of China is yet to give any comments on the particular news.

However, a central bank official had said earlier this month that China would maintain ‘appropriate’ growth in total social financing, adding that current liquidity level in China’s banking system is reasonably ample.

In December, commercial banks in China extended far more new loans than expectation and finally leading the tally of 2018 to $2.4 trillion.

Anyways, there are factors like weaker sales and profits that are making Chinese firms reluctant to borrow from banks. As per an estimate, new corporate loans in the fourth quarter were half the levels seen in the first nine months of the year.

Off late China has been taking many steps to keep its economy on the track including macro-economic policy tweaks. But, it is still unclear on the degree of impact of the steps taken by China.

Marjorie Glover
About author

Marjorie Glover is a news editor and writer with a special interest in business and finance. She holds graduate degree in journalism and working as a news writer for FinanceKnown. In her spare time, She usually roaming around with friends.
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