PBOC warns against one-sided pursuit of credit expansion

Agencies and staff reporter

China's central bank cautioned against a "one-sided" pursuit of credit expansion after data showed a slowdown in bank lending, vowing to prioritize the quality of credit over size and move to revitalise existing loans.

The central bank will channel more funds into technology innovation, green manufacturing and small firms, the Communist Party committee of the People's Bank of China said in an article in the official People's Daily.

The PBOC revealed that the yuan credit balance jumped 10.6 percent and the social financing balance by 9.5 percent in 2023, both much faster than 4.6 percent of nominal gross domestic growth over the same period.

And the yuan loan balance has accumulated to nearly 250 trillion yuan (HK$270 trillion).

"With the transition of the economy from high-speed growth to high-quality development ... it is even more necessary to change the traditional mindset of one-sided pursuit of scale and establish the concept of prioritizing quality and efficiency," the PBOC said.

The central bank will guide financial institutions to maintain balanced credit allocation and boost stability and sustainability of loan growth, it said.

Meanwhile, China reiterated the need to prevent one-sided moves in the yuan, as a resurgent dollar and poor risk sentiment pressure currencies across Asia.

The nation will "resolutely" put the yuan back on track when traders place lopsided bets and it'll also try to avoid excessive volatility, the People's Bank of China said in a report on its social media account yesterday.

The Chinese currency slid to the weakest since November earlier this week on bets the US won't rush into cutting interest rates and the world's second largest economy will struggle to recover.

Speaking at a press briefing in Beijing, Zhu Hexin, deputy governor of the PBOC and head of the State Administration of Foreign Exchange, said "the central bank's goal and determination to maintain the basic stability of the yuan's exchange rate will not change."

The onshore yuan dipped 41 basis points yesterday to 7.239 per US dollar. On the other hand, the yuan's share in global payments further advanced to 4.69 percent in March, a record high, while that of the euro hit a new low of 21.93 percent.

Also yesterday, PBOC Governor Pan Gongsheng met with US Federal Reserve chair Jerome Powell and the International Monetary Fund managing director Kristalina Georgieva in the United States.