(Reuters) – China has told its banks to lend more in the final months of 2014 and relaxed enforcement of loan-to-deposit ratios to expand credit, sources told Reuters, as Beijing prepares to release data that could confirm the relentless slowing of its economy.
Figures on inflation, imports and fiscal spending in November have already undershot expectations since the People’s Bank of China (PBOC) sprang a surprise interest rate cut on Nov. 21, raising fears that the bid to boost lending could foreshadow more weak figures on industrial activity for the month, due on Friday, and on lending, due in the next few days.
“I wouldn’t be surprised by that at all,” said Andrew Polk, resident economist for the Conference Board in Beijing. “It seems pretty clear activity is continuing to weaken throughout this fourth quarter.”
Two sources with knowledge of the matter said China’s central bank increased the annual new loan target to 10 trillion yuan ($1.62 trillion) for 2014, up from what Chinese media have said was a previous target of 9.5 trillion yuan.
Banks have disbursed 8.23 trillion yuan of loans between January and October, so they will have to quicken the pace in the last two months if they are to meet the new target.
If upcoming data also proves worse than expected, some analysts say the PBOC could cut banks’ reserve requirement ratio (RRR) as soon as this weekend, allowing them to further increase lending.