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Central bank: Credit boom should go to real economy

(Xinhua)
Updated: 2009-05-15 15:25

China's central bank has asked lenders to ensure credit goes into the real economy, saying that risk control and credit expansion were equally important.

The request was posted in a notice on the People's Bank of China (PBOC) website Thursday. The country's credit boom this year reflected the relatively easy monetary policy and helped reduce deflationary expectations and boost confidence to ensure stable economic growth, according to a joint meeting of the PBOC and the China Banking Regulatory Commission held Wednesday.

The meeting also stressed banks should better scrutinize risk and ensure that money flowed into the real economy to meet the capital demand of industrial restructuring. Banks should continue to improve credit structure and capital adequacy.

Related readings:  Credit policy unchanged despite 1Q loan surge  China extends 1b yuan in February to SME credit  China urged to revamp rating, credit guarantee systems  Unusual credit growth

"We can't rule out the possibility that some money has flowed into the stock market, a situation that deserves close government monitoring," Guo Tianyong, professor at the Central University of Finance and Economics, said Friday.

He also said that at present, money velocity in China -- the rate at which money in circulation was used to buy goods and services -- was slow. He said this perhaps indicated that some of the money might not have gone into the real economy, but had instead flowed from the banking system directly into the stock market.

Chinese banks lent 5.17 trillion yuan ($760.29 billion) in the first four months of the year, exceeding the 5 trillion yuan full-year target set early this year.

Liu Yuhui, an economist with the Chinese Academy of Social Sciences, told Xinhua Monday that new bank loans could reach about 9 trillion yuan this year.

The PBOC said in its quarterly monetary report on May 6 that China's economy had done "better than expected" in the first quarter and pledged to maintain "ample" liquidity in the financial system to ensure economic recovery.