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News Analysis: Monetary policy shift unlikely amid lending boom

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BEIJING, Feb. 17 (Xinhua) -- China's prudent monetary policy is unlikely to change in the near future as stronger-than-expected lending in January suggest robust demands in the real economy.

New yuan-denominated lending reached 1.32 trillion yuan (216 billion U.S. dollars) in January, up 247 billion yuan year on year and marking a four-year high, according to the People's Bank of China (PBOC) Saturday.

In January 2009, in a bid to fight the global economic downturn, China's new yuan-denominated lending hit 1.62 trillion yuan. The figure was 1.39 trillion yuan in January 2010, 1.04 trillion yuan in 2011, 738.1 billion yuan in 2012 and 1.07 trillion yuan in 2013.

Experts believe that the government is expected to maintain current policy unless economic growth sees an sharp slowdown and the property bubble bursts.

Zhong Zhengsheng, a researcher at Guosen Securities, said fast loan increases mean economic growth in the first quarter will not decline too much, so the chances of a policy shift would be low.

Social financing, funds raised through bank credit and other means, also set a record of 2.58 trillion yuan, up 1.33 trillion yuan from December and up 39.9 billion yuan from a year earlier.

Economist Lu Zhengwei of the Industrial Bank, said the growth was unexpected, and would, to some extent, ease concern about economic slowdown and make it impossible for the central bank to loosen the policy.

High deleveraging pressure on banks and enterprises makes it difficult to stimulate growth by loosening monetary policy, said Peng Wensheng, chief economist at the China International Capital Corporation (CICC).

While large funds from the shadow banking sector have mostly flown to real estate and local government financing, the leverage ratio of financial institutions and enterprises remains high, Peng noted.

"Growth is slowing and inflation is going downward, but the property bubble and accumulation of financial risk have reduced the space for counter-cyclical policy," Peng added.

"The monetary policy won't be loosened until growth significantly decelerates, housing prices come under control and the money supply slows down," Peng said.

The latest central bank move to add liquidity to the market doesn't represent a shift in monetary policy, said Xie Yaxuan of China Merchants Securities.

"The move was more about calming volatility during Spring Festival," Xie added.

The experts expected the country's monetary policy in 2014 to be "stable and slightly tight," which could be evidenced by what the central bank said recently.

The PBOC's latest assessment of the economy and inflation, and its statements concerning risk and liquidity control all point to maintaining stability of monetary conditions, Xie said.

Prudent monetary policies in 2014 were promised in the statement after a four-day central economic work conference in December, the meeting which traditionally sets the tone for the following year's economic planning.

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