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Fri, Jul 31, 2009 - Page 10 News List

PRC promises loose monetary policy to maintain recovery

AFP , SHANGHAI

China’s central bank reaffirmed it will pursue a loose monetary policy to support the country’s economic recovery, after shares recorded their biggest drop in eight months.

The People’s Bank of China published remarks by Vice Governor Su Ning (蘇寧) after the market slumped 5 percent on Wednesday, in part because of concerns that banks had been ordered to rein in aggressive lending.

The plunge, which was the largest single-day percentage decline since Nov. 18, also had a knock-on effect on Wall Street and on other stock markets around the world.

China will “steadfastly continue to apply an appropriately loose monetary policy to consolidate the economic recovery momentum,” Su was quoted as saying in a statement posted late on Wednesday on the bank’s Web site.

State media reported this week that two top Chinese commercial banks — Industrial and Commercial Bank of China (中國工商銀行) and China Construction Bank (中國建設銀行) — had set ceilings for new loans this year as regulators raised fears over credit risks.

If put in place, the ceilings would imply the banks had already issued about 80 percent of their total lending for the year in the first half and credit growth would slow sharply in the second half.

Su stressed at a meeting in Shanghai that market-based tools rather than government-set lending quotas, which worry investors, would be used to ensure appropriate credit growth and facilitate economic growth, the statement said.

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