Bank of China

Beijing tipped to further ease monetary policy

PUBLISHED : Wednesday, 22 February, 2012, 12:00am
UPDATED : Wednesday, 22 February, 2012, 12:00am

The mainland will further ease its monetary policy and loosen the funding tap for small and medium-sized enterprises (SMEs), according to a top Hong Kong banker.

Standard Chartered Bank executive director and chief executive Benjamin Hung Pi-cheng said yesterday that the People's Bank of China was likely to lower the level of reserves it requires lenders to maintain by another two to three rounds in coming months.

Last Friday, the central bank lowered the so-called reserve requirement ratio by half a percentage point to 20.5 per cent for larger banks and 18.5 per cent for smaller banks, releasing an estimated 400 billion yuan (HK$492.67 billion) in additional lending supply.

Hung said he believed that further monetary easing was necessary to strike a balance between the mainland's economic growth and consumer price inflation.

While more funding was made available across the border, SMEs in Hong Kong were also given greater access to financing through the Hong Kong government offer of guaranteeing up to 80 per cent of loans in a HK$100 billion financing scheme revealed earlier this month, he said.

Hung said banks had grown more confident about lending since the European Central Bank injected liquidity into the euro-zone banking system in response to the sovereign debt crisis.

In addition, Greece yesterday finally secured US130 billion in finance from Europe's finance ministers, pre-empting a default on its borrowings. 'This will be positive to the market in the short term,' Hung said on the sidelines of the Asia Pacific Economic Co-operation summit on small and medium-sized enterprises.

At the summit, with a theme of entrepreneurship, the executive deputy chairman of export trader Li & Fung, William Fung Kwok-lun, said Hong Kong SMEs were open to abundant opportunities under the mainland's 12th five-year plan for spurring domestic consumption.

He said the mainland would overtake the United States as the world's largest consumer market by 2039. Hong Kong had been a 'window for the mainland to look outward' during China's 30-year reform period to 2009, Fung said.

'In the next 30 years, Hong Kong will be the window looking inward.'

Li & Fung, which sources consumer goods such as cosmetics, fridges and apparels from lower-cost regions and exports them to the West, aimed to take a slice of the robust domestic market, he said.

'The mainland believes in the theory that by lifting wages at an annual rate of 13 per cent and putting more money into the pockets of workers, consumption power will rise and hence boost the creation of a domestic consumer market,' he said.

The annual wage rise Beijing stipulated between 2010 and 2015, however, ate into the nation's reputation as 'the factory of the world'.

Fung said as a result the majority of Li & Fung's goods were now sourced outside China in lower-cost regions such as Bangladesh, India, and Southeast Asian nations.

Smartphone maker HTC-VIA chairwoman Cher Wang, who with her husband Chen Wen-chi were rated by Forbes as the richest couple in Taiwan, said at the summit that entrepreneurs should start off their businesses with passion and enjoy what they are doing.

Many find it hard to keep going, but humility was important and also the ability to learn from mistakes, she said. 'As a Christian, I forget the past and look forward.'