Bank loans higher than 2010 target
By Zhang Fengming |
January 12, 2011, Wednesday
|
Print Edition
Print Edition
CHINA'S bank loans exceeded targets in 2010, increasing pressure on the authorities to tighten policies, central bank data showed yesterday.
Meanwhile, China's foreign exchange reserves surged faster than expected to a record US$2.85 trillion by the end of 2010, consolidating China's position as the world's biggest foreign reserve holder.
Banks in China issued 7.95 trillion yuan (US$1.2 trillion) of yuan-denominated loans last year, beyond the official target of 7.5 trillion yuan, the People's Bank of China said yesterday on its website.
The country's foreign reserves grew 18.7 percent, or US$448 billion, in 2010, following a US$452 billion increase in 2009.
China is expected to continue to increase its foreign reserves, which could reach US$3 trillion this year, economists said.
"Rapid gains in foreign reserve accumulation in China are a result of its high trade surplus, robust inbound foreign investment and speculative inflows," Alaistair Chan, a Moody's Analytics economist, said yesterday.
China's M2, the broadest measure of money supply, grew a faster-than-expected 19.7 percent in 2010.
In December, new yuan loans grew to 480.7 billion yuan, compared with 380 billion yuan a year ago. December's figure was down from November's 564 billion yuan and the lowest of the year but still higher than expectations.
China's foreign reserves rose US$199 billion in the fourth quarter of 2010.
Chan said China's strong bank lending and monetary aggregate data imply loose monetary conditions. Ample liquidity has been cited as a factor in fueling inflation, as capital turns to commodities and food for returns.
"The data suggests that economic activity remains buoyant and inflationary, hence the central bank will be under pressure to quicken the pace of tightening, while balancing market expectations to prevent a surge in speculative inflows," he said.
The view is echoed by Chang Jiang, a Barclays Capital economist, who said he expects the central bank to continue to use open market operations, reserve requirement ratio increases and interest rate increases to control the pace of lending.
China shifted its monetary policy from relatively loose to prudent this year. In 2010, China raised interest rates twice and the amount of money that lenders must keep in reserve six times in an effort to mop up liquidity and tame inflation. Banks now face a record high reserve requirement ratio of 18.5 percent.
The one-year benchmark deposit rate rose to 2.75 percent, while the one-year benchmark lending rate increased by the same 25 basis points to 5.81 percent in late December.
The consumer price index, the main gauge of inflation, rose to a 28-month high of 5.1 percent in November. It means the de facto savings rate is still negative.
Meanwhile, China resumed yuan appreciation against the dollar in June. The yuan has gained more than 3 percent since then. A more valuable yuan can make imports cheaper and curb inflation.
Meanwhile, China's foreign exchange reserves surged faster than expected to a record US$2.85 trillion by the end of 2010, consolidating China's position as the world's biggest foreign reserve holder.
Banks in China issued 7.95 trillion yuan (US$1.2 trillion) of yuan-denominated loans last year, beyond the official target of 7.5 trillion yuan, the People's Bank of China said yesterday on its website.
The country's foreign reserves grew 18.7 percent, or US$448 billion, in 2010, following a US$452 billion increase in 2009.
China is expected to continue to increase its foreign reserves, which could reach US$3 trillion this year, economists said.
"Rapid gains in foreign reserve accumulation in China are a result of its high trade surplus, robust inbound foreign investment and speculative inflows," Alaistair Chan, a Moody's Analytics economist, said yesterday.
China's M2, the broadest measure of money supply, grew a faster-than-expected 19.7 percent in 2010.
In December, new yuan loans grew to 480.7 billion yuan, compared with 380 billion yuan a year ago. December's figure was down from November's 564 billion yuan and the lowest of the year but still higher than expectations.
China's foreign reserves rose US$199 billion in the fourth quarter of 2010.
Chan said China's strong bank lending and monetary aggregate data imply loose monetary conditions. Ample liquidity has been cited as a factor in fueling inflation, as capital turns to commodities and food for returns.
"The data suggests that economic activity remains buoyant and inflationary, hence the central bank will be under pressure to quicken the pace of tightening, while balancing market expectations to prevent a surge in speculative inflows," he said.
The view is echoed by Chang Jiang, a Barclays Capital economist, who said he expects the central bank to continue to use open market operations, reserve requirement ratio increases and interest rate increases to control the pace of lending.
China shifted its monetary policy from relatively loose to prudent this year. In 2010, China raised interest rates twice and the amount of money that lenders must keep in reserve six times in an effort to mop up liquidity and tame inflation. Banks now face a record high reserve requirement ratio of 18.5 percent.
The one-year benchmark deposit rate rose to 2.75 percent, while the one-year benchmark lending rate increased by the same 25 basis points to 5.81 percent in late December.
The consumer price index, the main gauge of inflation, rose to a 28-month high of 5.1 percent in November. It means the de facto savings rate is still negative.
Meanwhile, China resumed yuan appreciation against the dollar in June. The yuan has gained more than 3 percent since then. A more valuable yuan can make imports cheaper and curb inflation.
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