China's economy is facing heightened overheating signs, as outstanding bank
loans surged 15.97 percent year on year by the end of May amid a seemingly
unabated investment binge, a news report said Friday.
Chinese banks extended 209.4 billion yuan (26.1 billion U.S. dollars) worth
of local currency loans in May alone, nearly double that of the same month last
year, the Xinhua-run Shanghai Securities News reported. The "big four" state
banks accounted for half of the new loans.
The villa area at the
foot of Fragrance Hill in northwestern Beijing. [newsphoto
In the first five months alone, newly-added loans reached 2.12 trillion yuan,
already nudging the annual target of 2.5 trillion yuan set by the central bank.
Broad money supply jumped 19.5 percent in May.
The Securities News paper said it obtained the figures from insiders. The
government's announcement is set to come out later this month.
The government has accelerated efforts to rein in excessive spending in real
estate, roads, factory equipment and other fixed assets this year to cool the
economy, which, largely driven by investment, has been growing at roughly 10
percent in each of the past three years.
On April 28, the People's Bank of China raised the minimum rate commercial
banks charge on one-year loans in local currency, the yuan, 27 basis points, to
5.85 percent in an aggressive move to discourage lending. It was the first
increase since October 2004.
The central bank, however, left interest rates on deposits unchanged as,
theoretically, increased interest paid on deposits could encourage savings and
dampen spending enthusiasm at a time when China is hoping its consumers will
contribute more to economic expansion.
In the meantime, the central bank required domestic commercial banks buy
multi-billion-yuan bills it issued in most weeks in a bid to further restrain
their lending capacities.
However the new figures show China's latest round of the macro-control --
which also include a recent campaign by nine ministries under the State Council,
or the Cabinet, to cool down the heated real estate market, by lifting the down
payment requirement for house purchases -- had very limited effects, economists
and government officials acknowledge.
Chinese banks may issue as much as 3 trillion yuan worth of loans in 2006,
As big Chinese banks are rushing to go public and improve business prior to
fully opening the country's financial market to foreign rivals by the end of
this year under a WTO commitment, they increasingly focus on loan profits.
China Construction Bank, which took the lead among the "big four" state banks
to list its shares last October, has seen a much bigger lending size than the
three others so far this year.
China targets an 8 percent growth rate for the full year, but the world's
fastest-growing major economy expanded a revised 10.3 percent in the first
Zhou Xiaochuan, China's central bank chief, told a recent seminar in Beijing
that another rise of interest rates is not on the agenda. He said as financial
data for May are not yet available, it's not known whether the April loan rate
hike has had its desired effect.
A rate hike cannot have immediate effects as China's immature market lags
behind in response, said Zhao Xijun, an economic professor with the
Beijing-based Renmin University of China.
Instead, many economists say the government might use mixed tools, including
administrative and exchange rate measures, to cool down the roaring economy.
Commercial banks are also urged to raise their required reserves at the central
bank as a way of reducing the money that otherwise can be lent.
But Zhao said he believes a stepped-up economic expansion is actually in need
of greater financial support.
"We cannot limit (loan growth) in accordance with the data seen in previous
years," he told Xinhua.