BEIJING, Mar. 11 -- China's banking regulator will work to ensure "every cent" lent out by the nation's financial institutions this year enters the real economy to help guard against inflation while maintaining growth, Chairman Liu Mingkang said.
This year "will be extremely complex and full of uncertainties," Liu said in an interview with Xinhua news agency published late yesterday. "Faced with inflation expectations, we will have to deal with the problems of ample liquidity while at the same time maintaining continuity and stability in our policies."
"The government has the experience, awareness and tools to release a lot of signals at the right moment to adjust inflation expectations," Liu said. "China's consumer and producer price indexes may rise slightly, but the chance of higher-than- moderate inflation is very small."
Wen warned last week of excessive property-price gains and "latent risk" in China's banks after a record 9.59 trillion yuan ($1.40 trillion) of loans were granted last year. The government has set a target for new bank loans this year of 7.5 trillion yuan.
The China Banking Regulatory Commission (CBRC) will make sure that lending follows the government's industrial restructuring policies and is carried out in a balanced and steady manner, Liu said in the interview.
Banks will be required to "reasonably control growth in lending" this year and try to achieve a balanced and steady quarterly expansion of credit, Liu said. They must ensure they adhere to rules covering capital adequacy ratios, provisioning, leverage ratios, and guard against the excessive concentration of loans, he said.
He identified six major risks banks need to pay attention to this year, including lending that doesn't comply with the government's industrial restructuring policies, the illegal use of personal loans for investing in capital markets and credit to the real-estate industry.
Property is one of China's pillar industries and the commission will continue to support its development, Liu said. "But real estate is also a high-risk industry, so the commission will take a cautious approach to property lending," he said.
The country has more than 50,000 real-estate developers so banks must be "conservative" and "prudent" in deciding the leverage they allow borrowers, pay close attention to the collateral they offer and blacklist those who have a record of irregularities, Liu said.
The commission is also watching lending procedures to local governments who use their land reserves as collateral for loans, he said.