The mainland central bank yesterday vowed to 'firmly stick' to its moderately loose monetary policy, reassuring the market that there would be no credit tightening despite a lending surge in the first quarter of the year.
The stance highlights a growing policy rift between the People's Bank of China, which is committed to lifting growth, and the China Banking Regulatory Commission, which is concerned about rising bad loans.
Yi Gang, a deputy governor of the PBOC, said in a statement on the bank's website that lending expansion had 'more benefits than drawbacks' at a time when the country was grappling with an economic slowdown.
Credit data released two weeks ago showed new loans extended by mainland banks rose to 4.58 trillion yuan (HK$5.2 trillion) in the past quarter, or 91.6 per cent of the 5 trillion yuan full-year target.
However, the CBRC has repeatedly emphasised risk controls and the increasing potential of more non-performing loans recently, underscoring concerns the authorities may rein in lending to prevent bank assets going sour.
'China's stimulus package has an effect, but the financial crisis is still spreading. China faces big challenges, including slackening external demand, declining corporate profits, falling fiscal revenue and a gloomy employment outlook,' Mr Yi said.
