China’s banking regulator plans to slow new lending to between 7 trillion yuan ($1 trillion) and 8 trillion yuan next year, a person with knowledge of the matter said.
The China Banking Regulatory Commission’s recommended range compares with 8.9 trillion yuan of new local-currency loans in the first 10 months of this year. The person spoke on condition of anonymity because he isn’t authorized to discuss the matter publicly.
China is trying to ensure credit flow is enough to support an economic recovery while limiting the risk that this year’s credit boom leads to bad loans and asset bubbles. The country will maintain a “moderately” loose monetary policy to keep economic growth from slowing, according to a statement from the annual central economic work conference that ended Dec. 7.
The government’s 4 trillion yuan stimulus package and record bank lending helped ailing exporters refinance debt and provided funding for an acceleration in fixed-asset investment, reigniting economic growth that had fallen to the lowest in more than a decade.
China’s credit boom may erode the quality of bank balance sheets as the jump in lending was “unavoidably” linked to an easing of credit standards, the Bank for International Settlements said in a quarterly report published this month.
A debt-fueled increase in investments “may imply additional demand for loans in the future, to complete the underlying project,” the BIS said. Should China tighten monetary policy, that could “leave projects incomplete and lead to a build-up of bad loans.”
The CBRC’s loan target requires approval from the central government, the person said. The 7 trillion yuan to 8 trillion yuan range is similar to one proposed by Tang Shuangning, former vice chairman of the regulator, on Nov. 21.
The China Banking Regulatory Commission’s recommended range compares with 8.9 trillion yuan of new local-currency loans in the first 10 months of this year. The person spoke on condition of anonymity because he isn’t authorized to discuss the matter publicly.
China is trying to ensure credit flow is enough to support an economic recovery while limiting the risk that this year’s credit boom leads to bad loans and asset bubbles. The country will maintain a “moderately” loose monetary policy to keep economic growth from slowing, according to a statement from the annual central economic work conference that ended Dec. 7.
The government’s 4 trillion yuan stimulus package and record bank lending helped ailing exporters refinance debt and provided funding for an acceleration in fixed-asset investment, reigniting economic growth that had fallen to the lowest in more than a decade.
China’s credit boom may erode the quality of bank balance sheets as the jump in lending was “unavoidably” linked to an easing of credit standards, the Bank for International Settlements said in a quarterly report published this month.
A debt-fueled increase in investments “may imply additional demand for loans in the future, to complete the underlying project,” the BIS said. Should China tighten monetary policy, that could “leave projects incomplete and lead to a build-up of bad loans.”
The CBRC’s loan target requires approval from the central government, the person said. The 7 trillion yuan to 8 trillion yuan range is similar to one proposed by Tang Shuangning, former vice chairman of the regulator, on Nov. 21.
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