China's central bank is posed to take action to help the country
overcome persistent deflationary pressures.
Dai Xianglong, governor of the ,
said Friday the central bank will pursue a more rapid credit growth
in the remaining part of the year than originally planned.
Target for growth of the broad money supply measurement M2 in 2002
is now set at 14 percent, one point higher than the original goal
of 13 percent set at the beginning of the year.
But Dai, speaking at a central bank conference, said a new interest
cut is unlikely. He reminded his colleagues that the country's
interest rates, after eight slashes since 1996, are already at
their lowest level in two decades.
Instead of a rate cut, the central bank will allow commercial banks
to float their lending rate in a wider range to make them more
willing to issue loans to smaller enterprises.
Bankers believe interest rates for loans to smaller enterprises
need to be higher than official rates because lending to these
firms is generally more risky.
The central bank will also grant more loans to rural cooperatives
to make them more financially capable of supporting agricultural
and other business activities in rural areas, Dai said. Many of the
rural financial institutions are in great need of capital to
sustain their businesses.
The central bank is making this money supply plan adjustment after
the country has seen three quarters of falling prices.
Although the country's economic growth rate remained at a robust
7.6 percent during the first three months of the year, its consumer
price index, another key barometer for the condition of the
economy, still lingers in negative territory.
China's banks are apparently taking on increasing responsibility in
powering economic growth, after the finance minister and other
major economic officials said recently it is time for the
four-year-fiscal stimulus policy to be phased out.
The government's input in infrastructure has been playing the
leading role in driving the country's economic growth since
1998.
But the input, mainly financed by treasury bond issues, pushed the
government's deficit to 260 billion yuan (US$31 billion) last year
and triggered worries over the health of public finances.
But it is also not an easy job for banks, many of which are
struggling with high levels of non-performing loans and are
unprecedentedly wary in issuing new loans.
This is why the central bank has decided to allow them to charge
higher lending rates than previously permitted.
Dai also urged commercial banks to enhance their marketing
capabilities to increase their proficiency in lending and making
profits.
(China
Daily June 1, 2002)