Seasonal factors, govt debt swaps cause loan drop
The nation's prudent monetary policy hasn't changed, the central bank said Saturday, after an unexpected drop in banks' new lending in April sparked concerns that the government has been more cautious about loosening.
In April, banks made 555.6 billion yuan ($85.12 billion) in new yuan-denominated loans, less than half of the 1.37 trillion yuan level seen in March and also down 152.3 billion yuan from April 2015, the People's Bank of China (PBOC) said Friday.
In a subsequent statement on Saturday, the PBOC said that seasonal factors, together with the debt swap programs of local governments, caused the sharp drop in new lending in April and current credit growth was actually "stable and normal."
The central bank explained that lending usually rises in the first quarter of each year and then declines in April.
In addition, some existing bank loans from local governments were swapped into bonds in April, making it look like new loans declined. Taking this factor into consideration, total new lending in April would have exceeded some 900 billion yuan, the PBOC said.
The PBOC said in the statement that it will maintain its "prudent" monetary policy, which at the same time will be targeted and flexible to facilitate the country's "supply-side reform."
"There is no clear sign that the government is tightening the [monetary] policy," economists from the Bank of Communications said in a research note sent to the Global Times Friday.
But they also noted that rising domestic inflation as well as the unstable international economic situation has posed challenges for the PBOC. On the one hand, stimulus policies are needed to spur growth while on the other the central bank must be cautious to keep inflation from running wild.
Official data released last week showed that China's consumer inflation has remained at 2.3 percent for three consecutive months. At the same time, major economic indicators, such as investment and factory output, point to persistent downward pressure.
Hang Seng Bank said in a report on May 10 that the central government will still resort to cuts in interest rates and banks' reserve requirement ratios to spur growth, but the loosening will be more "moderate."
