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ICBC may use demand tool to gauge lending pace

By Wang Bo (China Daily)
Updated: 2010-01-28 08:11

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Industrial and Commercial Bank of China (ICBC) yesterday said it has no plans to curb lending due to policy tightening, after posting steady credit growth in January.

The bank said that it will "neither rush to lend nor halt lending", but admitted that credit growth has slowed since mid January after a lending surge at the beginning of the year.

ICBC said it would maintain a reasonable and balanced pace of lending based on real demand.

"Credit was growing at a relatively fast pace in the first half of January with funds flowing into the ongoing government-backed projects. The amount of new loans being issued is still lower than that of the same period last year," the bank said.

The statement came amid concerns that the government's tightening measures would lead to a slowdown in lending and in turn curb the nation's robust economic growth momentum.

The government has taken steps to tighten market liquidity with financial regulators repeatedly urging banks to rein in lending due to rising concerns over inflation and asset bubbles.

Sources said the central bank has imposed monthly loan quotas for lenders, and indicated that banks would not be permitted to lend if they exceed the limits.

Vice-Premier Li Keqiang said earlier this week in Zurich that China would "continue its moderately relaxed monetary policy and active fiscal policy" while "making policies more targeted and flexible in accordance with new situations".

Despite Li's comment, there are signs that policymakers are still concerned about the excessive liquidity in the market.

Liu Mingkang, chairman of China Banking Regulatory Commission, repeated a call yesterday that banks should reasonably control lending growth.

However, with new loans surpassing expectations, there are indications that there would be more controls on credit. Bank of China, which issued most of the new loans last year, said credit grew at a relatively fast pace in the first 20 days of January.

The central bank is planning to set specific reserve requirements for banks that have been lending at fast paces, like the mid-sized China Everbright Bank and Huaxia Bank.

Meanwhile liquidity concerns continued to weigh on the stock market. The Shanghai Composite index dipped 1.1 percent to a three-month low yesterday, with bank shares leading the plunge.