PBOC, regulator urge lenders to boost lending

Bloomberg

China’s central bank and banking regulator urged lenders to boost loans as the economy is battered by Covid outbreaks that have threatened growth this year.
People’s Bank of China (PBOC) Governor Yi Gang and other officials met with 24 major financial institutions to discuss credit conditions and work, the central bank said in a statement on Tuesday. The meeting called on banks to accelerate the delivery of approved loans, and also maintain the stable growth of property loans, according to the statement.
“Major financial institutions need to shoulder their responsibilities, make use of all resources to effectively connect with credit demand and strengthen policy transmission,” according to a statement that quoted from the meeting. It added that banks should focus on key areas such as small businesses, green projects, technology innovation, energy supply and infrastructure.
Representatives from China Development Bank, Agricultural Bank of China and China Citic Bank Corp. all discussed their work to maintain credit growth at the meeting.
The pledge came after data showed earlier this month that loan growth slumped sharply in April to the worst level in almost five years, as consumers and businesses shunned borrowing during the country’s Covid-19 lockdowns. A proxy for household mortgages contracted again, prompting the PBOC to cut the minimum mortgage rate for first-time homebuyers. Lenders also lowered a key reference rate for mortgages.
The PBOC also vowed to guide banks to “go all out” to increase loans, according to a separate statement published on Tuesday about a meeting discussing credit. The central bank also said it would support lenders to lower financing costs, as well as step up help for small businesses in order to stabilise the economy and jobs.

“The statement seems to be a guidance to encourage commercial banks to increase credit support to the real economy,” said Peiqian Liu, an economist at NatWest Group Plc. “It was not a new policy initiative but reinforced our view that the 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 likely remained weak this month, as the interest rate on transferring bankers’ acceptances maturing in one month dropped to near zero again. Previous declines in the rate in December and April coincided with softening in company loans. That suggested banks were aggressively swapping commercial paper — which is deemed a form of lending to companies — between themselves to meet regulatory requirements.
“The economy’s downward pressure continues to increase, many market entities are struggling, and the work on money and credit has become more complex, grim and uncertain,” the PBOC said.
The central bank statements also came after China rolled out a package of support measures largely targeted toward businesses struggling to cope with Covid lockdowns. Those plans were outlined late Monday in state media after a State Council meeting.
The PBOC’s statements Tuesday also 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.