Social financing target eyed

Shanghai Daily, March 4, 2011

China may announce a total social financing target to better represent the big picture of total funding to real economy during the top legislature's meeting that will open tomorrow, economists said.

The central bank is shifting to a broader concept of social financing size from bank credit as loans alone can't show the full picture of monetary conditions.

"Given the building momentum, it is likely that indicative targets for total social financing and its components will be announced during or after the National People's Congress," Citibank said in a report.

Deutsche Bank predicted a 15 percent drop in total social financing to 9.4 trillion yuan (US$1.4 trillion) this year. The social financing was estimated to fall 14 percent to 11 trillion yuan in 2010 after a 118 percent rise in 2009.

Social financing size, a measure of total financial support to the real economy, was introduced in late 2010 and has since been promoted to replace credit growth as one of the targets for monetary policy.

Sheng Songcheng, the statistics chief of the People's Bank of China, said in February that the capital from stock and bond markets, those paid by insurers as coverage, and other non-banking capital should be included in the social financing size to show the entire and true picture of total financing.

But the PBOC hasn't disclosed its components and targets.

Citibank said the target for total loans, including trust loans, designated loans, and bank acceptance bills which sometimes are not reflected on banks' balance sheets, would be especially relevant since it should be under the control of the PBOC and would be more binding.

China shifted its monetary policy from accommodative to prudent this year to ward off asset price bubbles and tame inflation.

It sees a 7-percent annual economic growth during the 12th Five-Year Plan (2011-2015) from the 7.5 percent rise in the past five years.

Deutsche Bank said a better way to understand monetary conditions is to directly calculate the social financing size, which includes most off-balance sheet lending of the banks as well as financing from the capital markets.