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Shift to social financing focus
By Zhang Fengming |
February 18, 2011, Friday
|
Print Edition
Print Edition
CHINA'S central bank is shifting to a broader concept of social financing from just bank credit, as loans alone can't show the full picture of monetary conditions in the country.
The capital from stock and bond markets as well as that paid by insurers as coverage and other non-banking capital should be included to show the size of the social financing to present the true picture of monetary conditions, Sheng Songcheng, the statistics chief of the People's Bank of China, said yesterday.
"As China's financial industry evolves, new financing channels such as private-equity and hedge funds will also boost the real economy," Sheng said in a note on the central bank's website. "Once conditions mature, such capital should also be included in the social financing size."
Before 2009, bank lending accounted for only about 20 percent of total fixed-asset investment in China. Bank loans boomed in 2009 and 2010 as China launched its anti-crisis measures to fuel economic growth.
However, credit's weight and importance in supporting the real economy is decreasing with the rise of other financial sectors.
Economists welcome the changes to the monetary indicator. They said the shift also showed the authorities' aim to beef up its direct financing via bonds or equities and rely less on bank lending to drive economic growth.
"It means tighter control of bank credit and encouraging bonds," said Lu Zhengwei, an Industrial Bank senior economist.
In the past, as loans were the major indicator of monetary conditions, some banks tried to bypass credit control by boosting their off-balance-sheet capital such as trust loans.
"We believe that a better way to make sense of the monetary conditions is to directly calculate the social financing size, which includes most off-balance-sheet lending of banks and financing from the capital markets," Deutsche Bank said in a note.
The capital from stock and bond markets as well as that paid by insurers as coverage and other non-banking capital should be included to show the size of the social financing to present the true picture of monetary conditions, Sheng Songcheng, the statistics chief of the People's Bank of China, said yesterday.
"As China's financial industry evolves, new financing channels such as private-equity and hedge funds will also boost the real economy," Sheng said in a note on the central bank's website. "Once conditions mature, such capital should also be included in the social financing size."
Before 2009, bank lending accounted for only about 20 percent of total fixed-asset investment in China. Bank loans boomed in 2009 and 2010 as China launched its anti-crisis measures to fuel economic growth.
However, credit's weight and importance in supporting the real economy is decreasing with the rise of other financial sectors.
Economists welcome the changes to the monetary indicator. They said the shift also showed the authorities' aim to beef up its direct financing via bonds or equities and rely less on bank lending to drive economic growth.
"It means tighter control of bank credit and encouraging bonds," said Lu Zhengwei, an Industrial Bank senior economist.
In the past, as loans were the major indicator of monetary conditions, some banks tried to bypass credit control by boosting their off-balance-sheet capital such as trust loans.
"We believe that a better way to make sense of the monetary conditions is to directly calculate the social financing size, which includes most off-balance-sheet lending of banks and financing from the capital markets," Deutsche Bank said in a note.
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