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China central bank calls for 'more rational' lending

(Agencies)
Updated: 2009-04-23 11:55

China's central bank has told the country's leading banks to extend loans at a "steadier and more rational" pace after a surge in credit in the first quarter, Caijing magazine reported on Thursday.

Related readings:  New yuan loans surge  Rapid rise in lending double-edged  China to keep relaxed monetary policy  Lending 'is determined by market'

The article added that in the first 20 days of April the amount of outstanding loans issued by most big commercial banks had declined, which would signal an abrupt turnaround from the lending spree since the start of the year.

The People's Bank of China summoned officials in charge of lending operations from the five main commercial banks to a meeting on Wednesday to discuss the next step in the country's credit management policy, Caijing said.

"The central bank will not control the scale of credit extended by commercial banks, but we do hope that banks can lend loans more steadily and rationally in the coming three quarters," Yi Gang, vice governor of the central bank, was quoted as saying at the meeting.

New loans in the first quarter totaled 4.58 trillion yuan ($671 billion) after a record leap of 1.89 trillion yuan in March alone. China had set a target of at least 5 trillion yuan in new lending for the year as a whole.

Some economists are concerned that the jump in lending will add to excess capacity and eventually saddle China's banks with a new crop of bad loans.

There have also been worries that many of the new loans have gone mainly to government-backed projects or short-term financing, and have not lent support to the private businesses that have been hit hardest by the economic downturn.