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New lending surge not a risk, says bank chief

CHINA'S central bank vice governor said it saw no risks from the surge in new lending this year.

The People's Bank of China and other regulators have found little evidence that a significant amount of new lending has flowed into the stock market, the China Securities Journal reported today on its Website, citing vice governor Su Ning.

Su said the situation was "not serious."

Banks extended fewer loans last month compared with January, Su said, without giving figures. Credit growth is likely to slow later this year because banks tend to frontload their lending to take early profits.

"The whole-year credit growth should be within a rational range," he said.

Banks in China extended 1.62 trillion yuan (US$237 billion) in new local-currency loans in January. At the same time, M2, the broadest measure of money supply, including deposits and cash, climbed 18.8 percent from a year earlier, topping the central government's 17 percent annual target.

February credit is expected to surge too. China International Capital Corp said it believes the February incremental loan amount will be between 900 billion yuan and 1 trillion yuan. The figures will be available next week.

CICC said that after checking with the state-owned big four banks in China, its bank sector analyst learned that they had lent 560 billion yuan in loans in February. Given the big-four's 50 percent market share, the forecast is that nationwide new lending tops about 1 trillion yuan.

"The risk of non-performing loans is increasing obviously. But given the time lag, we don't think this is a problem in 2009," CICC, China's major investment bank, said.


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