China's central bank stresses credit boom should go to real economy

BEIJING, May 15 (Xinhua) -- China's central bank has asked lenders to
ensure credit goes into the real economy, saying that risk control and credit
expansion were equally important.

"We can't rule out the possibility that some money has flowed into the
stock market, a situation that deserves close government monitoring," Guo
Tianyong, professor at the Central University of Finance and Economics, said
Friday.

He also said that at present, money velocity in China -- the rate at which
money in circulation was used to buy goods and services -- was slow. He said
this perhaps indicated that some of the money might not have gone into the real
economy, but had instead flowed from the banking system directly into the stock
market.

The request was posted in a notice on the People's Bank of China (PBOC)
website Thursday. The country's credit boom this year reflected the relatively
easy monetary policy and helped reduce deflationary expectations and boost
confidence to ensure stable economic growth, according to a joint meeting of the
PBOC and the China Banking Regulatory Commission held Wednesday.

The meeting also stressed banks should better scrutinize risk and ensure
that money flowed into the real economy to meet the capital demand of industrial
restructuring. Banks should continue to improve credit structure and capital
adequacy.

Chinese banks lent 5.17 trillion yuan (760.29 billion U.S. dollars) in the
first four months of the year, exceeding the 5 trillion yuan full-year target
set early this year.

Liu Yuhui, an economist with the Chinese Academy of Social Sciences, told
Xinhua Monday that new bank loans could reach about9 trillion yuan this year.

The PBOC said in its quarterly monetary report on May 6 that China's
economy had done "better than expected" in the first quarter and pledged to
maintain "ample" liquidity in the financial system to ensure economic recovery.

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