Credit Ex­pan­sion Buoyed by Real Econ­omy

Beijing Review - - Business Market Watch - This is an edited ex­cerpt of an ar­ti­cle orig­i­nally pub­lished by Xin­hua News Agency Copy­edited by Chris Sur­tees Com­ments to yushu­jun@bjre­view.com

growth out to 2020. That im­plies credit to the real econ­omy will have to stay on a rapid growth path,” Or­lik said.

In a bid to im­prove credit sup­port for small and mi­cro-sized en­ter­prises, star­tups and agri­cul­tural pro­duc­tion, the PBC re­cently an­nounced a tar­geted re­serve re­quire­ment ra­tio (RRR) cut.

The new pol­icy, which goes into ef­fect in 2018, of­fers com­mer­cial banks a cut of 0.51.5 per­cent­age points in the RRR if their annual out­stand­ing or new loans in in­clu­sive fi­nanc­ing reach cer­tain re­quire­ments.

China In­ter­na­tional Cap­i­tal Corp. Ltd. had pre­vi­ously es­ti­mated that the cut may re­lease more than 800 bil­lion yuan ($122 bil­lion) of liq­uid­ity into the econ­omy af­ter im­ple­men­ta­tion.

Ac­cord­ing to Jiang Chao, chief econ­o­mist at Haitong Se­cu­ri­ties Co. Ltd., the an­nounce­ment, to­gether with the Septem­ber M2 data, did not in­di­cate that the cen­tral bank is loos­en­ing its stance on fi­nan­cial delever­ag­ing.

“Tak­ing into ac­count the high lever­age in the do­mes­tic real es­tate mar­ket and po­ten­tial in­ter­est rate hike by the U.S. Fed­eral Re­serve, it’s un­likely the PBC will loosen its mone­tary pol­icy,” Jiang said.

PBC data also showed that in the first three quar­ters, Chi­nese banks ex­tended 11.16 tril­lion yuan ($1.7 tril­lion) in new loans, 998 bil­lion yuan ($152 bil­lion) more than that in the same pe­riod last year.

New loans made to non-fi­nan­cial en­ter­prises and gov­ern­ment in­sti­tu­tions hit 5.73 tril­lion yuan ($871.43 bil­lion) in the first nine months, in­di­cat­ing credit de­mand from the real econ­omy.

Medium- to long-term loans made to home buy­ers, mainly con­sist­ing of per­sonal hous­ing mort­gages, in­creased by 4.2 tril­lion yuan ($638.74 bil­lion) dur­ing the pe­riod.

By the end of Septem­ber, out­stand­ing yuan loans had grown 13.1 per­cent from a year ear­lier to 117.76 tril­lion yuan ($17.91 tril­lion).

The nar­row mea­sure of money sup­ply (M1), which cov­ers cash in cir­cu­la­tion plus de­mand de­posits, rose 14 per­cent year on year in Septem­ber, on par with the rate at the end of Au­gust.

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