The People's Bank of China began on Friday to issue 101 billion
yuan (US$12.9 billion) of central bank bonds earmarked for
commercial banks in a bid to squeeze their lending capacities.
It was the second time this year that the central bank issued
compulsory-purchase bonds exclusively for commercial banks, after
an issue of the same amount in March.
The new three-year bank bands have a contract interest rate of
3.22 percent, six base points lower than the ordinary bonds that
financial institutions compete to buy, and three base points lower
than the previous issue.
"The lower interest rate is a stronger punishment of commercial
banks for their excessive lending in the first quarter," Friday's
China Securities Journal cited unnamed analyst as
saying.
China's newly-added outstanding loans surged to 1.42 trillion in
the first quarter, 13 percent up from the same period last year and
almost half of the quota set by the central bank for the whole
year.
"Economic overheating, excessive lending and liquidity have
grown out of the expectation of the central bank, which is why the
central bank has adopted a series of austerity measures," said Hu
Yuhang, an analyst with CITIC Securities.
The central bank announced last month its decision to raise the
bank deposit reserve ratio by 0.5 percentage points as of May 15,
the fourth rise this year, in an effort to rein in excess liquidity
and slow growth.
"The central bank is resolute in curbing the excessive growth in
credit supply and fixed assets investment and the austerity
monetary policy will continue," said Qin Juan, an analyst with
Chang Xin Asset Management.
The new issues are targeted at nine commercial banks that
experienced fast growth in credit supply in April, with 25 billion
yuan each for the Industrial and Commercial Bank of China and
Agricultural Bank of China, 18 billion yuan for China Construction
Bank and 16 billion yuan for the Bank of Communications.
(Xinhua News Agency May 12, 2007)