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ECONOMY
Weekly Watch> WEEKLY WATCH NO. 3, 2011> ECONOMY
UPDATED: January 14, 2011 NO. 3 JANUARY 20, 2011
Lending Spree
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Chinese banks granted 7.95 trillion yuan ($1.2 trillion) of yuan-denominated loans in 2010, overshooting the government-set target of 7.5 trillion yuan ($1.1 trillion), said the People's Bank of China, the central bank. The figure, however, represented a 17.1-percent drop from 2009.

The broad money supply (M2), which covers cash in circulation and all deposits, stood at 72.58 trillion yuan ($11 trillion) by the end of 2010, up 19.7 percent year on year, also topping the government's target of 17 percent.

The lending surge was one of the triggers for runaway inflation that has been stretching the nerves of policy makers.

"Lending remains strong due to robust domestic demands," said Guo Tianyong, Director of the Research Center of China's Banking Industry under the Central University of Finance and Economics. "A number of infrastructure projects and construction of massive affordable houses are shoring up the needs for financing."

The policy makers have not set a target for new loans this year, but they are less likely to risk killing the economic growth by putting a freeze on credit expansion, said Ding Zhijie, a professor of finance at the University of International Business and Economics.

In a recent statement, the central bank vowed to keep liquidity at a reasonable level, fend off financial risks and also strengthen financing support for the small and medium-sized enterprises.



 
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