The Chinese economy is expected to race ahead at around 10 percent average growth this year, the central bank said Thursday, as regulators called for a clampdown on credit to the heated real estate sector.
The People’s Bank of China forecast represents an average of economic growth rates across most of the country, it said on its website.
The government’s official target for national gross domestic product (GDP) growth in 2006 is a modest eight percent, but China’s economy posted a 10.3 percent expansion in the first quarter.
The report also warned that overcapacity could impact industries this year, highlighting continued concerns in Beijing about overinvestment and the risk of sector-specific deflationary scenarios.
At the same time banking regulators added their official concerns about the level of surplus credit in the country’s fragile banking system that is still undergoing restructuring.
Liu Mingkang, chairman of China Banking Regulatory Commission (CBRC), said China’s macro economy and financial sector were developing at a fast and stable rate, but more needed to be done to reel in the booming property sector.
“We need some strong action to maintain the banking industry’s stable momentum,” Liu said in the report posted on the commission’s website.
New measures proposed included strict controls of new loans, curbing financing to property developers and stemming the issuance of credit lines to local governments.
Reducing banks’ non-performing loans, optimizing lending structure, while increasing credit to small- and medium- enterprises were also cited.
“Banks with capital adequacy ratios under the eight percent requirement should especially control the pace of their lending,” it said.
Premier Wen Jiabao last week called on regulators to use further tax, credit and land polices to bring high city property prices under control and address the “imbalanced” structure of the real estate sector.
The banking commission’s also said that lenders should prioritize first-home buyers in their credit decisions and stay away from financing luxury housing projects.
A number of key state agencies last month jointly issued an order to commercial banks to curb their issuance of credit lines to local governments, warning that they could translate into higher and unsustainable rates of fixed-asset investment.
China’s banks extended about 1.57 trillion yuan (196 billion dollars) in new loans in the first four months of this year – more than half the 2.5 trillion yuan target set for the year.
