China c.bank urges banks to boost loans

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China c.bank urges banks to boost loans

China's central bank and banking regulator has urged lenders to boost loans as the economy is battered by Covid outbreaks that threaten growth this year.

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The central bank said Tuesday that People s Bank of China Governor Yi Gang and other officials met with 24 major financial institutions Monday to discuss credit conditions and work. According to the statement, the meeting called for banks to accelerate the delivery of approved loans, and also maintain the stable growth of property loans.

According to a statement released from the meeting, major financial institutions need to shoulder their responsibilities, make use of all resources to connect with credit demand and strengthen policy transmission. It stated that banks should focus on key areas such as small businesses, green projects, technology innovation, energy supply and infrastructure.

Representatives from the China Development Bank, the Agricultural Bank of China and China Citic Bank Corp. talked about their work to maintain credit growth at the meeting.

The pledge came after data showed that loan growth fell sharply in April to the worst level in almost five years, as consumers and businesses shunned borrowing during the country's Covid lockdowns. A proxy for household mortgages contracted again, prompting the PBOC to cut the minimum mortgage rate for first-time homebuyers. A key reference rate for mortgages was lowered by lenders last week.

According to Peiqian Liu, an economist at NatWest Group Plc, the statement appears to be a guide to encourage commercial banks to increase credit support to the real economy. It was not a new policy initiative but reinforced our view that monetary easing now focuses more on quantity-based policy easing. Credit impulse will likely rebound further to support the post-lockdown recovery. Corporate demand for loans is likely to be weak this month, as the interest rate on transferring bankers acceptances maturing in a month dropped to near zero on Monday. The rate of declines in December and April coincided with a softening of company loans. That suggests banks were aggressively swapping commercial paper - which is deemed a form of lending to companies between themselves to meet regulatory requirements.

The central bank said it would support lenders to lower financing costs, as well as increase help for small businesses in order to stabilize the economy and jobs.

The economy's downward pressure continues to increase, as many market entities are struggling, and the work on money and credit has become more complex, grim and uncertain, according to the PBOC.

The central bank statements came after China rolled out a package of support for businesses struggling to cope with Covid lockdowns. Plans were outlined late Monday in the state media after a State Council meeting.

The PBOC's statements Tuesday included language about using tools that provide funds for banks to encourage lending to small businesses, reiterating some of the measures outlined by the State Council.

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