China’s Premier Li Keqiang warns central bank of ‘new potential risks’ posed by record loans in January
- New yuan loans last month reached US$476.97 billion, almost triple the amount from December, after Beijing eased regulations in a bid to its boost slowing economy
- People’s Bank of China hits back, saying growth in short-term lending ‘mainly supported the real economy’ amid the US-China trade war
Premier Li Keqiang has warned of the “new potential risks” that China’s record level of new loans in January could bring to the financial system.
The People’s Bank of China (PBOC), China’s central bank, confirmed that new yuan loans surged to 3.23 trillion yuan (US$476.97 billion) last month, almost triple the 1.08 trillion yuan (US$160.8 billion) of loans in December and beating the 3.06 trillion yuan from the same period last year.
Total social financing, the more broadly defined measure of credit in the economy that includes loans, bonds and other non-traditional financing instruments, grew to 4.64 trillion yuan (US$685.18 billion) in January.
“Apparently, total social financing grew rapidly after the signal sent by the reserve ratio cut. But a careful reading of the data tells us bill financing and short-term loans are rising relatively fast,” said Li during Wednesday’s State Council meeting.
“This will not only lead to arbitrage and inefficient circulation of capital, it will also bring new potential risks.”