The central bank will stick to an appropriately easy monetary policy but will ensure reasonable growth in money and credit, the People's Bank of China (PBOC) said Thursday.

In a summary of the conclusions drawn at its second-quarter monetary policy committee meeting, the central bank said yesterday that it would ensure reasonable growth in money and credit but would strictly control lending to polluting, energy-intensive industries.

The slight shift in tone, as analysts pointed out, is in line with an earlier notice by the banking regulator, which asked banks not to resort to excessive lending to meet targets, but rather focus on strengthening credit management.

"The top priority at the moment is to stop the explosive growth in lending at the end of the month and quarter," China Banking Regulatory Commission said in a recent notice to lenders, pointing to the phenomena of banks racing to offer loans before June to meet their half-year lending targets.

The PBOC statement also helps to dispel a market rumor that the central bank may cut bank reserve requirement ratio (RRR) to fund the money market before the resumption of initial public offerings (IPO) on June 29, analysts pointed out.

PBOC scrapped open-market operations to repurchase bills on the money market on Tuesday for the first time in seven months, which triggered market speculation it may further cut RRR to maintain liquidity in the market.

"Judging from the tone of the central bank today, a further cut in the RRR is unlikely," Li Jianfeng, economist, Shanghai Securities, said.

"The current liquidity in the money market is enough even though the resumption of IPOs may suck part of it. It is groundless to cut the RRR further to add to liquidity," Li said.

China's total new yuan loans has been growing robustly in the past five months and may reach 6.5 trillion yuan in the first half, media reported.

"The suspension of open market operations, in fact, has helped to ease the necessity of cutting RRR or interest rates," Chen Baoqiang, analyst with China Merchants Securities, said. "There is no need for the central bank to make such an adjustment if it can use the open market to control liquidity."

The PBOC added 115 billion yuan of funds into the financial system this week, according to Guo Caomin, a fixed-income analyst at Industrial Bank Co, Bloomberg reported. That is the biggest weekly injection of capital in five months. The central bank sold 50 billion yuan worth of 91-day bills yesterday.

(China Daily June 26, 2009)