PBOC to stick to prudent monetary policy

China's central bank on Wednesday reiterated it would stick to a prudent monetary policy stance but warned of continuing credit expansion pressure, following its Monday announcement of robust credit growth for September.

In a statement posted on its website, the People's Bank of -China (PBOC). the country's central bank, said it will insist on continuation of its prudent monetary policy stance with well-timed, minor fine-tuning.

The PBC will apply a mix of various monetary policy tools to respond to changing situations, while maintaining banking system liquidity and keeping credit and overall social financing growth at reasonable levels, said the statement.

"Considerable pressure remains for monetary credit expansion, especially considering the continuously widening trade surplus and substantial foreign exchange inflows [into the country]," the statement said.

China's new yuan loans rose to 787 billion yuan ($128.99 billion) in September from the previous month's 711 billion, beating previous market expectations, data from the central bank showed Monday. Growth in outstanding yuan loans also jumped to 14.3 percent year-on-year in September from 14.1 percent in August.

The above-par credit growth data - which came on the heels of data showing inflation reached a seven-month-high in September - caused some market observers to anticipate possible policy tightening moves later this year. But most market watchers believe there will be no significant change in policy stance.

"I do not see any possibility of big monetary policy moves [such as] changes in interest rates or reserve requirement ratios [in the foreseeable future]," Xu Bo, an analyst with Bank of Communications in Shanghai, told the Global Times Wednesday.

Open market operations will still be prioritized by the central bank, said Xu, who forecast that the robust loan growth seen in September would not continue during the fourth quarter.

With similar expectations of no radical policy changes, Zhu Haibin, chief China economist at JP Morgan Chase & Co in Hong Kong, said in a research note sent to the Global Times Wednesday that "credit will maintain mild growth before the year-end."

New yuan loans for the whole year are expected to see record year-on-year growth of 14.5 percent, rising to 9.1 trillion yuan, according to Zhu.

Rapid growth of lending in the property sector was also highlighted in the Wednesday statement, but the central bank noted accelerated growth in lending for the development of affordable housing.

The statement also noted that the majority of personal mortgage loans were going to first-home buyers, an indication of restrained speculation in the property market.

Commercial banks have not yet announced any specific policies about halting mortgage loans, the central bank said, while noting that the approval and extension of mortgage loans has been delayed in some cities since September, owing to the rapid growth seen in mortgage loans in the first three quarters.

Meanwhile, the central bank pledged to forge ahead with market-based deposit rate reform in a gradual and steady way.

But no concrete measures will be announced in the first quarter of next year to liberalize bank deposit rates, said Bank of Communications' Xu.