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Local banks manipulate China’s central bank rules
The Epoch Times
In China, local governments and banks are manipulating data to get around new rules imposed by the central government to cool down an overheated economy.
The Chinese economy has faced pressure from rising inflation since the latter half of 2003. The central government has reacted by adjusting the loan reserve ratio three times, from 6 percent last September to 7.5 percent in April, trying to tighten the credit market. Official statistics show that after the first increase in the bank reserve rate, the average monthly new loans figure dropped from 230 billion yuan (US$27.8 billion) in the third quarter to 97.9 billion (US$11.8 billion) in fourth quarter.
But local governments and organizations are manipulating the loan data they send to the central government to circumvent the regulations. On March 12, China’s central bank, the People's Bank of China published a financial report showing agricultural loans increased 80.2 billion yuan (US$9.7 billion) in the first two months of this year. Increasing agricultural loans are in line with central government policy.
However, on March 17, China’s National Bureau of Statistics published a report showing that fixed asset investment in agriculture for the first two months was only 10 billion yuan (US$1.2 billion), a difference of 70 billion from the People's Bank report. At the same time, investment in steel was up 140 percent and construction 44 percent. Steel and construction are two industries that the central government wants to slow down, fearing over-investment.
The People's Bank data also shows no significant increase in the loan volume for these two industries over the two-month period. They even report that short-term loans for the construction industry have gone down.
During the BOAO Forum for Asia, regional conference for government leaders held in April, Wu Xiaoling, Deputy Governor of People’s Bank of China, answered a question about the increases in bank reserve rate.
Wu said, “This regulation measure is a kind and soft one. Hopefully respective organizations will behave themselves, try not to intensify the conflict and make the central bank take more strict measures, which nobody wants to see.” Wu also warned, “Do not take advantage of the central bank’s soft regulation right now to speed up investment. Big economic fluctuation will cause there to be more strict policy in the future.” He also said, “Don’t go gambling with the central bank, we are all on the same boat.”
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