Bad loans threaten China
Source: China Economic net
China must prevent a rebound of bad loans as cash floods the financial sector amid a ballooning trade surplus, the nation’s banking regulator said.
“China’s economy has maintained double-digit growth for four straight years, but it’s the right moment to pay keen attention to ward off bad-loan growth,” Tang Shuangning, vice chairman of the China Banking Regulatory Commission, said in a statement posted on the agency’s Website yesterday.
China’s economy faces excess liquidity from mounting foreign currency reserves, pushing the regulator to prevent large economic fluctuations, he said in the note.
China’s foreign-exchange reserves topped US$1.2 trillion at the end of March, year-on-year growth of 37.36 percent. China’s M2, the broadest measure of money supply including cash and deposits, jumped 17.3 percent to 36.41 trillion yuan (US$4.72 trillion) at the end of March.
Financial institutions added 1.42 trillion yuan in new yuan-backed loans in the first three months, bringing the total to 23.96 trillion yuan.
The People’s Bank of China ordered banks to increase the reserves they place at the central bank three times this year. It also raised interest rates in the bid to curb lending.
China’s booming economy, which soared 11.1 percent in the first quarter, has led economists to forecast that more such tightening measures are on the horizon for later this year.
