PBOC's upbeat tone adds to signs of rebound in mainland growth
Comments from quarterly meeting of monetary policy committee note 'positive changes'
The mainland's central bank struck a slightly more optimistic tone in assessing the economy at a recent quarterly meeting of its monetary policy committee, saying economic and financial structures had begun showing "positive changes" and that economic operations remained in a "reasonable range".
The comments, in a statement released by the People's Bank of China yesterday, are another sign indicating a rebound in economic growth. Premier Li Keqiang said last week that the economy did better last quarter.
The central bank did not elaborate on the changes. A more detailed report on the meeting usually follows weeks after a summary is published.
Reiterating comments that appeared in the first-quarter report, the central bank said it would stick to a prudent monetary policy, maintain "appropriate liquidity", pursue reasonable growth in credit supply and social financing, and push forward with reforms to interest rate and exchange rate mechanisms.
But it added that "multiple monetary policy tools" would be used to facilitate reasonable credit growth, without offering more details. Mainland media have reported that the central bank is considering creating base money through a new tool called pledged supplementary lending, in a bid to lower funding costs while also guiding medium-term policy interest rates.
After gross domestic product growth eased to an annual rate of 7.4 per cent in the first quarter, the lowest in 18 months, Beijing has focused on driving up infrastructure investment, cutting taxes for small companies and releasing more liquidity through lowering banks' reserve requirement ratios, in a bid to defend its annual GDP growth target of about 7.5 per cent.
The mainland's four biggest banks may have extended 290 billion yuan (HK$363 billion) in new credit last month, according to mainland media reports. Based on their share of the mainland banking system, new yuan lending could have hit about one trillion yuan last month.
That would help fund local infrastructure projects such as subways and water treatment facilities, as well as support the building of more affordable housing.
The central bank's positive tone on the mainland's financial structure may indicate that the authorities' concerns over a build-up of local government debt are limited, although some analysts warned the credit bubble remains a worry.
The mainland's private sector debt to GDP ratio stood at 194 per cent in the first quarter, some 30 percentage points above its 25-year trend, Credit Suisse said, which was well above the deviation of 10 percentage points the Bank for International Settlements says is a sign of increased risk of financial trouble.
A cooling real estate market posed risks, Credit Suisse said, as 54 per cent of mainland bank loans were backed by property.