Beijing to keep credit growth steady
CHINA'S central bank pledged yesterday to use a mix of policy tools to adjust banking liquidity to ensure steady credit growth, in an apparent bid to soothe market concerns over tighter monetary conditions.
The central bank will "use a mix of price and quantitative policy tools to adjust liquidity in the banking system and guide steady and appropriate growth in money, credit and social financing", it said in a statement on its website.
The central bank allowed short-term interbank borrowing costs to spike to nearly 30 per cent on June 20, a blunt warning to overstretched lenders that they must bring risky lending under control.
The cash crunch - caused by factors including fast credit growth, the regulatory deposit- reserve requirement and a crackdown on hot money inflows - is abating after the central bank signalled its readiness to soothe market volatility.
The People's Bank of China, while affirming its prudent monetary policy, also said a temporary jump in short-term interest rates would not hurt the real economy.
"Overall, liquidity in the banking system remains ample," it said. "The slower M2 growth last month was in line with the expected outcome of macro-economic adjustments and prudent monetary policy, and was closer to the full-year target of 13 per cent."
The central-bank pledge came after data published last Friday showed the total social- financing aggregate, a broad measure of liquidity conditions that includes bank loans and bond sales, fell to 1.04 trillion yuan (S$213.7 billion) last month.
Analysts said falling total social financing could reflect the government's crackdown on shadow banking, forcing banks to scale back their balance-sheet lending.
Annual growth of the broad M2 money supply also slowed to 14 per cent last month, its slackest pace of expansion in six months.