China will continue to implement a relaxed monetary policy and keep sufficient liquidity in the banking system, the People's Bank of China said yesterday.
The statement appeared to be the central bank's response to new data released on Saturday, which showed new yuan loans and money supply growth surged to record highs in March.
"We must continue with macro-economic controls set by the central party committee and state council, implement a moderately-relaxed monetary policy, maintain continuity and stability of monetary policy," the bank said in a statement after a routine meeting to review economic performance in first quarter. We must maintain liquidity in the banking system, and ensure monetary supply is sufficient to meet the needs of economic development."
Banks extended 1.89 trillion yuan ($276.6bn) in local currency-denominated loans in March, bringing the total for the first quarter to 4.58 trn uan – nearing the government's full-year target of at least 5rn yuan.
That helped lift annual growth in the broad M2 measure of money supply to a record 25.5 per cent in March, up from 20.5 per cent in February and easily exceeding economists' expectations of a 21.3 per cent rise.
"Give more support to the agricultural sector, small and medium enterprises and other weak links, concretely resolve some financing difficulties faced by companies, strictly control lending to high-polluting, high-energy consuming industries and to those with over-capacity," the bank added.
Smaller and private firms struggled after the Chinese authorities clamped down on lending well over a year ago. They have not benefited much from the recent relaxation since banks view them as more risky, given the global crisis.
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