Thursday, January 01, 2009
"a vice governor of the PBoC was interviewed on state radio last night and said the central bank was targetting new lending of 4.6 trillion yuan in 2009. Yet he also said that new lending in 2008 was 4.5 trillion yuan. So, that would mean the central bank is targetting only 100 bln yuan of extra bank lending in 2009 which seems odd given that the banks have been told to boost lending in the face of the economic slowdown."
He further notes that the original new loan target in 2008 was to be 3.6 trillion RMB. So why is the year end figure 4.5 trillion??
My reply: As far as I know, much of the huge boost in lending WAS a result of manic lending in the last quarter. I saw a figure which I used in the editorial which says November alone had 477 billion in lending. Lending is perhaps too precise; "credit" is perhaps more accurate to capture what banks provided in the last quarter. This vice governor (Yi Gang?) was giving a target on incremental loans, but usually we only know about what they do on the aggregate. That is, what is the percentage increase in loans outstanding. As far as I know, next year's target is something like 15-16%, which is higher than this year's 11-12%. That might work out to be 4.6 trillion in new loans (depends on how much loans come due next year...etc.).
Generally speaking, the PBOC tends not to be enthusiastic supporters of massive investment programs. However, they follow the same master as everyone else, so they will bow to pressure to increase lending. In any event, banks see which way the wind is blowing and will exceed the quota if they think Hu will be pleased with them. The Ag Bank has been specially tuned into political signals. I think Guo Shuqing had better follow suit if he wants to be the next governor of PBOC.