In response to the spreading global financial crisis, China’s monetary policy has recently stepped up its efforts frequently to maintain the momentum of steady and relatively rapid economic development. Following two consecutive interest-rate cuts in October, the People's Bank of China recently announced that it will no longer impose rigid constraints on commercial banks’ lending plans. Industry insiders commented that this strong measure sends a clear signal: it aims to effectively unleash the vitality of bank funds and inject new impetus into economic growth.
As is well known, in response to phenomena such as rising prices and rapid growth in investment and credit that began in the second half of last year, and in order to prevent large fluctuations in the economy, the central bank imposed strict constraints on commercial banks’ lending activities—specifically, it implemented scale controls on credit—based on the actual needs of macroeconomic regulation at the time. However, in light of recent developments since mid-year, the central bank has adjusted this measure in a timely manner.
In an exclusive interview with a Xinhua News Agency reporter, Li Chao, spokesperson for the central bank, pointed out that since mid-year, both domestic and international economic conditions have undergone rapid changes—particularly the swift spread of the global financial crisis, which has swept across the world. In response to these new circumstances, we have made timely adjustments. “This measure is consistent with current monetary policies such as interest-rate cuts; both are aimed at effectively addressing the global financial crisis and striving to minimize the potential negative impact of this crisis on China’s economy, thereby maintaining the momentum of steady and relatively rapid economic development in China.”
From the perspective of monetary policy, the central bank has recently adjusted the intensity of its open-market operations in a timely manner to ensure adequate liquidity supply. It has lowered the reserve requirement ratio and the benchmark interest rate for banks on multiple occasions, expanded the range of downward adjustments to personal housing loan rates, and provided support for residents’ first-time purchases of ordinary residential homes. These measures send a very clear market signal of commitment to sustaining economic growth and stabilizing market expectations.
Since the middle of this year, small and medium-sized enterprises have frequently faced difficulties in obtaining financing, and banks themselves are keenly eager to make flexible use of their funds. A senior bank executive stated, “The central bank’s removal of credit controls is precisely in response to market changes, giving commercial banks greater flexibility, boosting their enthusiasm and initiative, and enhancing the dynamism of fund utilization.”
Meanwhile, some other financiers hold a different view. They believe that “in fact, judging from the current situation, China’s banking system has ample liquidity. On the premise of guarding against risks, commercial banks should further enhance their ability to deploy funds in response to market demand, support enterprises’ funding needs, hedge against the downside risks facing the real economy, and provide sustained momentum for economic development.”