China to stimulate growth in bank loans

Special Report:Global Financial Crisis

BEIJING, March 4 (Chinese media) -- China's central bank said Tuesday it would

ensure a "reasonable and steady" increase in bank loans this year to support the

country's economic growth amid the worsening global financial crisis.

Liu Shiyu, vice-governor of the People's Bank of China (PBOC), said the

country will "enhance support to the financial sectors for economic growth".

"We will enhance the 'window guidance' and inform financial institutions of

the (right) meaning of the central government's macroeconomic regulation to

guide reasonable loan extensions," the central bank said in a statement on its

website.

The country is expected to face severe challenges as the global financial

crisis is still worsening, the statement said.

The central bank has also urged local bank branches to strengthen "window

guidance" to ensure ample liquidity to support the country's drive to stimulate

economic growth.

Last year, the country's new yuan loans amounted to 4.9 trillion yuan, 1.3

trillion yuan more than that of 2007, with bulk of the lending going to rural

area development, small and medium-sized enterprises and reconstruction of

quake-hit regions.

China announced a 4-trillion-yuan stimulus package late last year to spur

domestic demand and prop up the slowing economy. Bank lending is deemed crucial

for powering the sagging economy, which expanded only 6.8 percent year-on-year

in the fourth quarter of 2008, down from 13 percent for 2007.

New yuan loans reached 1.6 trillion yuan in January, and according to media

reports, it may have touched 1.1 trillion yuan in February, much more than

market expectations.

"The lending scale in February has been beyond market expectations. It is

reasonable and necessary for getting the economy moving," said Dong Xian'an,

macroeconomic analyst, Southwest Securities, as cited by Wednesday's China

Daily.

Dong said the new yuan loans for this year could amount to 6 trillion yuan

given the growth momentum in the first two months, although they would not

remain at such a high level in the coming months.

A report by Haitong Securities said new yuan loans for the whole year could

reach 5.5 trillion yuan.