A blog on Chinese economy & society

China’s March lending estimated at RMB500bn

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The market’s focus on Chinese interest rate decision is quite off the target, as China has already started tightening, gently.

Being the command-market-whatever-economy that it is, Chinese credit expansion is not as sensitive to interest rate as other more advanced economies. One of the key policy tools the government uses is the so-called new bank loan quota. The PBOC pre-determines a quota for the entire year, barring unexpected event, and a draw down schedule for each quarter.

Under this draw down schedule, there’s only RMB150bn new bank loan quota left for March this year. Now, there is usually some “flexibility” given to the banks. As such, analysts estimate that actual new credit will expand by RMB300bn to 500bn, which may sound a lot but is actually down significantly from the RMB1,800bn of March 09.

Of course, many people thought the world was going to end in March 09. So perhaps the base for comparison isn’t quite right as China went on a credit binge last year to prop up its economy. But given the recent trade deficit, the world seems much closer to a double-dip. I for one think that the time is not ripe yet for a dramatic exit.


Written by Cindy Luk

March 24, 2010 at 4:40 pm

Posted in China, Macro

Tagged with , ,

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