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BEIJING, Feb. 21 (Xinhua) -- With Chinese banks' record new lending in 2009 igniting fears about asset bubbles and bad loan, the banking regulator's latest rules aim to bring financial risk under control.The new directives order banks to focus on loan quality control, rather than quantity restriction, and aim to make loans flow to the real economy -- rather than the property and stock markets, which are susceptible to asset bubble formation.Analysts say the directives are a smart way to handle the policy dilemma the central bank faced: with inflationary pressures growing after increased money supply, how can monetary policy be tightened without hurting the fragile economic recovery?The China Banking Regulatory Commission (CBRC) issued new regulations on Saturday evening telling banks to set lending quotas after "prudent calculation" of borrowers' "actual demand".It also reiterated working capital should not finance fixed-asset investment and equity stakes. The new rules also ask lenders to give funds directly to the end user declared by the borrower, instead of directly giving it to the debtor, in an effort to ensure loans are used for their declared purpose.Execution of the directives will help banks exit the "credit stimulus spree", as they pay more attention to risk control. The directives are crucial for the banks' sustainable expansion, said Yu Xiaoyi, analyst with Guangfa Securities.Loose oversight and easy monetary policy have led to many banks developing the bad habit of being excited about loan extension but indifferent to the tracking of loan use, which can result in credit appropriation, an unnamed insider told Xinhua.That allowed many Chinese enterprises to borrow much more than they needed in order to speculate with various types of investment, even though they had ample funds on hand for their routine business operations.In support of the government's 4-trillion yuan stimulus package, Chinese banks lent an unprecedented 9.6 trillion yuan in 2009, nearly half of 2009 gross domestic product.Researchers said that large amounts of the borrowed funds went into property and stock market speculation, further pushing up soaring house prices and further inflating asset bubbles.According to official data released by CBRC, some regions reported two to three percent of funds were misappropriated.Wang Kejin, an official with the Supervision Rules and Regulation Department of CBRC, told Xinhua "the current working capital and individual loans exceeded real market demand,"The inadequate monitoring of loan use demands improvement, otherwise creditors will suffer losses and systemic risks will build, the CBRC said in a statement on its website."Our purpose was to prevent it happening," the statement said.Ba Shusong, a researcher with the Development Research Center of the State Council, China's cabinet, said the new rules will further strengthen credit risk controls and put a "brake" on lending and keep the financial system in good health,Guo Tianyong, a professor with the Central University of Finance and Economics, said the new directive will prevent systemic risk after the rapid expansion in credit.Although the CBRC and the nation's central bank have repeatedly warned banks to maintain an even pace in lending growth and to avoid big fluctuations, new yuan loans hit a massive 1.39 trillion yuan in January, as banks scrambled to lend before an expected tightening in credit later in the year.CBRC chairman Liu Mingkang said on Jan. 27 the Chinese government is aiming to restrict credit supply to 7.5 trillion yuan (about 1.1 trillion U.S.dollars) in 2010.Analysts expect short-term loans to fall significantly on account of tougher lending requirements that prevent businesses using new loans to repay old credit, a phenomena rampant when bill financing with 180-day maturity comprised nearly half of new loans in the first quarter of 2009.To soak up the excess liquidity on the heels of lending spree, China has raised the deposit reserve requirement ratio (RRR) twice this year, after holding it steady for over a year, to handle the "comparatively loose liquidity" while keeping the "moderately easy" monetary policy unchanged.Jing Ulrich, Chairman of China Equities and Commodities at JP Morgan Chase, estimated China's new lending would fall 17 percent this year as the government takes steps to prevent inflation."While lending support for real economic activity is expected to continue, banks are likely to be more vigilant on shorter term credit facilities, given the regulator's anxiety over asset bubbles and capital adequacy ratios," she said.
WASHINGTON, Feb. 27 (Xinhua) -- China remains the largest foreign holder of U.S. Treasury securities as at the end of December, the U.S. media reported on Saturday.The report quoted the new government data as saying that China held 894.8 billion dollars in Treasury securities at the end of December, more than 755 billion dollars that had been previously estimated.But the new report also showed China trimmed its holdings of U. S. debt by 34.2 billion U.S. dollars in December.The U.S. Treasury reported on Feb. 16 that Japan surpassed China as the largest holder of U.S. Treasury securities in December. But the new estimate said Japan, now back in second place, held 765.7 billion dollars in December.Japan had been the largest holder of U.S. Treasury securities until China gained that distinction in 2008."Purchase of Treasuries by China would reflect only purchases by an entity in China from an entity based in the U.S.," Stone & McCarthy Research Associates said in a recent client note."The Data would not pick up purchases done on behalf of Chinese investors by dealers in the U.K or Hong Kong, for example, nor would it pick up purchases of Treasuries by investors in China from investors based outside of the U.S.," it added.China defended its move to reduce its holdings of U.S. Treasury securities, saying the United States should take steps to promote confidence in U.S. dollar .Last week, when responding to questions on China's sale of U.S. Treasury securities in December, China's Foreign Ministry spokesman Qin Gang said the issue should be viewed from two perspectives.He said on the one hand, China always followed the principle of "ensuring safety, liquidity and good value" in managing its foreign exchange reserve. And when it came to how much and when China buys the bonds, the decision should be made taking into account the market and China's need, so as to realize rational deployment of China's foreign exchange property, he said.And on the other hand, the United States should take concrete steps to beef up the international market's confidence in the U.S. dollar, Qin said.The way to view the issue was similar to doing business, he said.

BEIJING, Feb. 21 (Xinhua) -- The Chinese government's insight and the adjustment of the economic pattern were the two major factors helping China ride out the global economic downturn, scholars said here Sunday.Zhuang Fuling, professor of Renmin University, said the Chinese government made a correct analysis of China's economic situation and took quick and resolute action.At the end of 2007, the central government called for vigilance against possible scenarios of various sorts. Moreover, in the Central Economic Work Conference held in December 2008, China drew up guidelines to cope with the global economic downturn through domestic consumption expansion, development pattern transformation, key sectors reforms, and continued effort to open up and improve people's livelihood.Ye Duchu, professor of Party School of the Central Committee of the Communist Party of China (CPC), attributed the success to China's systemic advantages."We could employ the country's fullest strength to reduce or offset the negative implications of the crisis," Ye said.The National Bureau of Statistics revealed on Jan. 21 that China maintained a GDP growth rate of 8.7 percent in 2009 despite the global recession.The global financial crisis, by nature a challenge to China's development mode, prompted the country to quicken its drive to transform its economic pattern in a bid to realize sustainable development for the future, scholars say.Lu Zhongyuan, deputy director of Development Research Center under the State Council, said China should seize the opportunity to optimize the economic structure and promote the system and technological innovation.Jin Bei, president of Institute of Economy under Chinese Academy of Social Sciences, considered the crisis a good chance for competitive enterprises to carry out strategic adjustment.On Feb. 3, Chinese President Hu Jintao called for the whole nation's efforts to accelerate the adjustment of China's economic development pattern to promote sound and fast economic and social development.Wu Zongxin, counselor of Counselors' Office of the State Council, highlighted the building of the CPC in pulling through the global economic downturn."China's good performance during crisis is attributed to its staunch and capable leadership," said Wu.The Fourth Plenary Session of the 17th CPC Central Committee urged all Party members to be prepared for dangers in times of peace and push forward Party building work to ensure the Party's "backbone" position in people's minds when coping with various domestic and overseas challenges.Zhuang said the rapid and sustained economic growth called for strengthening and improving the Party building under the new circumstances.The cadres of the Party at county levels have been trained at the Party School of the CPC Central Committee since 2008 in a bid to better cope with the global financial crisis."This is an endeavor rarely seen in the world, thus guaranteeing China's effective response in fight against the crisis," said Ye.
GENEVA, March 17 (Xinhua) -- It's still not the time to talk about sanctions against Iran as the door of diplomacy is still open on finding a compromise over its nuclear program, He Yafei, China's ambassador to the United Nations Office in Geneva, said on Wednesday."I think the door of compromise through negotiations, the door of diplomacy, is not closed," He told reporters."We need to do our best, to exhaust every avenue before we decide on whether we should have new additional sanction measures, " He said.The Chinese ambassador said that Iran, as a member of the Nuclear Non-Proliferation Treaty (NPT), is entitled to the peaceful use of nuclear energy, but the country "should not develop any capability that can produce nuclear weapons.""We certainly do not want to see an Iran with a nuclear weapon capability...China is very much for safeguarding and strengthening the nuclear non-proliferation regime," He said.According to the ambassador, the way out for Iran's nuclear issue is to have a dialogue and to have negotiations with the country.He added that China had been talking to Iran constantly and urging the country to agree to a proposal by the International Atomic Energy Agency (IAEA) as a first step to solve the nuclear issue.Under the IAEA proposal, most of Iran's existing low-grade enriched uranium should be shipped to Russia and France, where it would be processed into fuel rods with the purity of 20 percent. The higher-grad nuclear fuel would then be transported back to Iran for the use at a research reactor.The United States and its Western allies have long been accusing Iran of secretly developing nuclear weapons under the disguise of a civilian program. Iran has denied the accusation and stressed its nuclear program is solely for peaceful purposes.Nowadays Western powers are talking about adopting new sanctions on Iran over its nuclear program through a UN resolution.
BEIJING, March 6 (Xinhua) -- A 17 percent year-on-year increase in China's broad money supply, and a target of 7.5 trillion yuan (1.1 billion U.S. dollars) for this year, indicated a relatively easy monetary policy, said Su Ning, deputy governor of the People's Bank of China, the country's central bank.Speaking on the sidelines of the ongoing annual session of the top legislature, the National People's Congress (NPC), Su said the 17 percent increase in the nation's broad money supply was larger than the combined increase of targeted GDP and CPI growth, which suggested an "easy" monetary policy."If M2 (the broad measure of money supply) growth is 2 to 3 percentage points higher than the combined growth of GDP and CPI, the monetary policy could be seen as easy," said Su.Chinese Premier Wen Jiabao said Friday, in the government work report submitted to the NPC, that China targeted an approximate 3 percent rise in consumer prices and 8 percent GDP growth this year.Su further believed the 17 percent increase in the broad money supply would be able to support the ongoing economic recovery throughout the country.China's financial institutions lent a record 9.6 trillion yuan in new yuan-denominated loans last year, almost double that of the previous year, to spur the economy amid the global downturn, but it was accompanied by soaring property prices and rising expectations of possible inflation.Su said the 7.5 trillion yuan in new lending this year should speed up completion of projects under construction, rather than support new projects.
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