Record-high loan growth tests monetary policy
Updated: 2008-02-15 16:31
Amid worries about the impact of the subprime loan crises and snowstorms on China's economy, the number of new loans hit a new monthly high in January and added more uncertainty about the future of the nation's monetary policy.
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By the end of January, the M2, a broad measure of money supply, had also grown 18.94 percent year on year to 41.78 trillion yuan, its fastest in 20 months. Meanwhile, the volume of M0, which measures money in circulation, rose 31.21 percent to 3.67 trillion yuan, according to PBOC.
"The surging credit growth in January does not mean tightening monetary policies have failed" Ha Jiming, chief economist at China International Capital Corp, told the Shanghai-based Oriental Morning Post yesterday, "It is the result of a drastic contraction in credit at the end of last year."
According to Ha and several other economists, last November's tightening monetary policy forced commercial banks to cut back loan scales for the rest of the year and wait until this year to issue the loans, thus leading to the January credit surge.
"In terms of the average figures for January and last December, the M2 growth was 17.83 percent, and loan growth 16.42 percent; both below last November's level," Ha noted.
Uncertainty ahead
Given the upgraded subprime loan crises in Western countries and the recent snow havoc that may hamper economic growth in some regions, the market seems to be anticipating adjustments or a relaxing of the currently tight monetary policy. However, policy uncertainties have intensified with the release of last month's hot credit figures.
Shen Minggao, chief economist for Citigroup in China, said there is still uncertainty ahead for the development of subprime issues, together with its influence in China. Meanwhile, the impact of snowstorms on the economy also requires further assessment. Therefore, the policy adjustment issue should be clarified after the National People's Congress assembly in March.
According to some other experts, the rebounding credit scale, along with a possibly high CPI figure in January, could spur the central bank to adopt more tightening measures such as a hike in the bank reserve requirement ratio.
More frequent reviews
In a related move, the Shanghai Securities News quoted sources as saying today that the financial regulator will shift the credit release review period from every quarter to every month.
In fact, the monthly review has been underway since January, a source close to the financial regulator told the paper.
Some experts say the shift should come as no surprise since the first several months of the year, and especially January, are always the peak lending period, and more regulations are justifiable under a tightening atmosphere. According to them, credit control will be tighter under a monthly review.
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