The People's Bank of China (PBOC) gave four reasons Sunday to explain the fast growth of bank loans in the first quarter of this year.

 

At the end of the first quarter, China reported total loans of 20.6 trillion yuan (US$2.575 trillion), up 14.7 percent over the previous year. The increase rate is 1.7 percentage points over the same period last year.

 

In the first quarter, domestic banks fulfilled roughly half of their lending targets for the whole year, adding 1.26 trillion yuan (about US$156.25 billion) in loans, up 13.98 percent from a year ago.

 

"Fast economic and fixed-assets-investment growth brought a strong demand for bank loans," said the spokesman.

 

China's economy, fueled by strong investment, soared by a higher-than-expected 10.2 percent in the first quarter despite macro-control measures.

 

The foreign trade surplus also continued to grow in the first three months and the increasing foreign exchange reserves meant more currency supply for banks to lend loans, he said. Statistics showed that the trade surplus reached US$23.3 billion in the first quarter.

 

Another reason for the fast loan growth was that commercial banks were seeking for greater profits through lending more money to businesses.

 

Commercial banks chose to lend loans earlier in the year than before in a bid to gain profits earlier, resulting in the rapid fulfillment of lending targets in the first quarter, explained the spokesman.

 

The loan growth rate has been higher in the first half year than in the second half since 2003, he added.

 

In order to cool the soaring economy through loan control, the central bank announced on April 28 a rise in the 12-month loan rate from 5.58 percent to 5.85 percent.

 

The PBC would rigidly control bank loans to industries with overheated investment and lend more money in support of weak links in the economy, the spokesman said.

 

(Xinhua News Agency May 15, 2006)