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January 6, 2010

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Governor urges careful lending

CHINESE banks must pace their lending carefully this year to avoid volatility as the tide of loans last year to overcapacity industries raised credit risks, China's central bank Governor Zhou Xiaochuan said.

The People's Bank of China will keep a good handle on the pace of monetary and credit growth, guide financial institutions toward a balanced issuing of credit and avoid excessive turbulence, he said in China Finance, a publication under the central bank, yesterday.

Zhou's comments reinforced the central bank's stance on its multi-target monetary policy this year.

Zhou said policy makers won't only target consumer prices in making policy, but factor in economic growth, job creation and the balance of international payments.

Zhou stressed that China's situation was different from developed nations or other emerging market economies. Single-target monetary policies appeared to be inadequate, especially in combating the global financial crisis.

China will continue its relatively loose monetary policy this year. Concern about inflation and assets bubbles rose amid the huge supply of credit last year.

In the first 11 months of last year, banks in China issued 9.21 trillion yuan (US$1.35 trillion) of local-currency loans, up 5.06 trillion yuan from a year ago.

China's new credit last year is expected to top 9.5 trillion yuan to 10 trillion yuan.

The tide of new credit in 2009 has pumped up China's economic growth against the backdrop of a global slowdown but also triggered fears of assets price bubbles.

Economists said they expected China's new yuan loans to top 8 trillion yuan in 2010 as a sharp drop was unlikely with China's relative easing of monetary policy.


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