China's central bank will not loosen control over loan
extensions despite complaints from local businesses about cash flow
problems, said Governor Zhou Xiaochuan of the People's Bank of
China.
"We will not slacken restrictions on loan extensions, though
commercial banks have reported a slightly smaller number of
non-performing loans," Zhou said at the China International
Conference in Finance 2004 held in the eastern commercial hub
Shanghai.
The three-day meeting is sponsored by the Chinese Finance
Studies Institute of the Beijing-based Tsinghua University, Sloan
School of Business of the US Massachusetts Institute of Technology,
and the Shanghai-based China-Europe International Business
School.
Zhou said although many small and medium-sized businesses
complain of difficulties in getting bank loans for operating funds,
loans granted by commercial banks for that purpose already account
for 70 percent of the country's gross domestic product.
"Compared with many other countries, the ratio of our bank loans
for enterprises' operating funds is quite high, even in the rural
areas, which is still a fledgling market for bank lending services,
" he added.
Chinese companies, including the best-performing ones, should
not underestimate loan risks, nor should they take it for granted
that banks will give them circulating funds only because their
products sell well, Zhou warned.
"Those beliefs are probably the last legacy left by the former
planned economy," he added.
According to the central bank governor, only 17.22 percent of
all the new short-term circulating fund loans extended in 2003 went
to State-owned enterprises (SOE).
By the end of 2003, loans extended to SOEs as short-term
operating funds accounted for 35.72 percent of incremented bank
loans. The figure dropped to 34.11 percent by the first quarter
this year.
"The percentage is quite close to the SOEs' 30 percent
contribution to the country's gross domestic product," said
Zhou.
The People's Bank of China said in a recent report that banks
doled out a combined 113.2 billion yuan (US$13.6 billion) in
renminbi-denominated loans in May this year, less than half of the
figure for a year earlier.
(China Daily July 10, 2004)