20 January 2011 03:09 [Source: ICIS news]
By Judith Wang
The country is targeting a 10% cut in loans to yuan (CNY) 7,200bn-7,500bn ($1,094bn-1,140bn) in 2011 from the CNY 7,950bn released in 2010, according to state-owned newspaper China Securities Journal.
The Chinese authorities would be reining in credit for the second consecutive year, which could stall planned expansions of domestic small-scale petrochemical players, analysts said.
“The lending reduction will no doubt hurt the key economic expansion driver, [which] includes investments in the chemical sector,” said Sun Fanghong, analyst at brokerage Ping An Securities in Shenzhen.
Too much liquidity floating in the country’s financial system after its lending binge led consumer prices to spiral upwards this year, pushing inflation to a 28-month high in November at 5.1%.
To ensure release of new loans would be capped, and money in circulation put under control, Chinese authorities were expected to nudge up both the banks’ reserve requirement, as well as the central bank’s key policy rates a few more times, analysts said.
The central bank took the first step towards this end this month, when the banks’ reserve requirement would increase by 50 basis points effective 20 January.
The PBoC raised the banks’ reserve requirement ratio, or the portion of deposits that must be placed with the central bank, six times in 2009, while it waited until the fourth quarter last year to jack up its policy rates, careful to increase borrowing costs while the global economic recovery remained fragile.
($1 = CNY6.58)
To discuss issues facing the chemical industry, go to ICIS connect
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections