19.09.2011, 09:18
Bank of China: Curbing Prices Still Priority
OREANDA-NEWS. September 19, 2011. China will continue to prioritize curbing prices and maintain its prudent monetary policy, the central bank said after data showed cooled inflation and higher lending in August.
"Some factors that drive prices upward have been contained but not eliminated, while inflation remains relatively high," the People's Bank of China said in a statement on its website.
It reiterated that stabilizing overall price levels remained the top priority of macro-economic regulation, and the country would continue its prudent monetary policy and keep the growth of credit stable and moderate.
The comments came amid market speculation that China will introduce stricter regulations to curb lending.
Some state-owned lenders have been ordered to freeze at least 20 billion yuan (3.1 billion U.S. dollars) at the central bank via designated central bank bills as a "punishment" for lending too strongly in August, media reports said, citing unidentified banking sources.
Low interest
Banks that don't toe the central bank line carefully enough were required to buy the bills that were issued with very low interest, a trader in a bank said.
On Sunday, the central bank said new yuan loans reached 548.5 billion yuan in August, 55.9 billion yuan more than July and 9.3 billion yuan more than last year.
"The growth in new loans probably indicates that the monetary policy has been easier to some sectors such as small enterprises, but the monetary policy in general has not loosened as inflation is not likely to cool significantly in the near future," the Bank of Communications wrote in a report.
The report said the central bank will rely more heavily on open market operations to withdraw liquidity, and estimated that new loans will total 7 trillion to 7.3 trillion yuan this year, compared to last year's 7.95 trillion yuan.
Peng Wensheng, a China International Capital Corp analyst, said another interest rate rise is expected this year, most likely this month or in October, to further contain inflation.
China's consumer price index cooled to 6.2 percent in August from its 37-month high of 6.5 percent in July, China's top statistics bureau said last Friday. However, inflation is still among the highest levels in the past three years.
"Some factors that drive prices upward have been contained but not eliminated, while inflation remains relatively high," the People's Bank of China said in a statement on its website.
It reiterated that stabilizing overall price levels remained the top priority of macro-economic regulation, and the country would continue its prudent monetary policy and keep the growth of credit stable and moderate.
The comments came amid market speculation that China will introduce stricter regulations to curb lending.
Some state-owned lenders have been ordered to freeze at least 20 billion yuan (3.1 billion U.S. dollars) at the central bank via designated central bank bills as a "punishment" for lending too strongly in August, media reports said, citing unidentified banking sources.
Low interest
Banks that don't toe the central bank line carefully enough were required to buy the bills that were issued with very low interest, a trader in a bank said.
On Sunday, the central bank said new yuan loans reached 548.5 billion yuan in August, 55.9 billion yuan more than July and 9.3 billion yuan more than last year.
"The growth in new loans probably indicates that the monetary policy has been easier to some sectors such as small enterprises, but the monetary policy in general has not loosened as inflation is not likely to cool significantly in the near future," the Bank of Communications wrote in a report.
The report said the central bank will rely more heavily on open market operations to withdraw liquidity, and estimated that new loans will total 7 trillion to 7.3 trillion yuan this year, compared to last year's 7.95 trillion yuan.
Peng Wensheng, a China International Capital Corp analyst, said another interest rate rise is expected this year, most likely this month or in October, to further contain inflation.
China's consumer price index cooled to 6.2 percent in August from its 37-month high of 6.5 percent in July, China's top statistics bureau said last Friday. However, inflation is still among the highest levels in the past three years.
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