Bank lending for a "real economy" is key to boosting growth in China, central bank official said

SHANGHAI (Reuters) – China should encourage its banks to support small private companies in the real economy, rather than forced lending or measures such as quantitative easing, said a Saturday newspaper 39 State, quoted by a central bank official.

"The central bank does not want to use administrative methods to force banks (to lend)," said Sun Guofeng, head of the monetary policy department at the People's Bank of China (PBOC), Financial News, a banking publication. .

"He wants to put in place positive incentive mechanisms through monetary policy tools to encourage banks to actively strengthen their support for the real economy, especially for small private companies," he said. said Sun.

These comments come one month after Sun wrote a comment that said that the problems of timely replenishment, bank liquidity deficits, and low rate "transmission" were three of the biggest hurdles to supply. bank credit.

In his interview with Financial News, Sun said the transmission of monetary policy was "significantly improved", showing that measures to strengthen the transmission mechanisms had been effective.

He said the central bank would strengthen the strength of innovation in monetary policy tools.

The issuance of perpetual bonds "is only a breakthrough" in reducing capital constraints on banks, Sun added, adding that "other methods" could be used in the future.

He said that quantitative easing was neither necessary nor possible at the moment, noting that in the Chinese financial system, the importance for the central bank to buy treasury bills Chinese on the secondary market is limited and the PBOC is not allowed to buy the instruments in the primary market. market.

Chinese banks made the largest number of new loans ever in January, following a series of stimulus measures as authorities tried to prevent a sharp slowdown in the world's second-largest economy.