Bloomberg News

Chinese Banks' Fourth-Qtr Confidence Rise From Slump

December 20, 2006

The confidence among Chinese bankers picked up in the fourth quarter from their lowest level in more than two years, as government efforts to cool lending and investments showed effect, the central bank said.

The bankers' confidence index rose to 58.4 in the fourth quarter, from 43.8 in the third quarter, the People's Bank of China said in a statement on its Web site today. The reading, based on a survey of 2,850 heads of financial institutions, rose for the first time in three quarters.

China raised key lending rates twice this year and increased the reserve requirements three times. The government also imposed administrative orders on new projects and land use to curb loans and investments in the world's fourth-largest economy.

Those measures helped slow economic growth to 10.4 percent in the third quarter, down from 11.3 percent in the second quarter, the fastest pace in more than a decade, according to government data.

The percentage of bankers who thought the economy will continue to overheat dropped to 44.7 percent, from 46.1 percent in the previous quarter, the central bank said.

The proportion of respondents who deemed monetary policy ``appropriate'' dropped to 54 percent. An increasing number of branch managers thought monetary policy is ``a bit tight'', the central bank said.

China's monetary policy will remain ``stable'' next year, the central bank's deputy governor Wu Xiaoling said yesterday. The government, holder of the world's largest foreign-currency reserves, said it will use more of the treasury's cash to set up guarantees to encourage more banks to extend loans for developing China's western provinces.

The banking industry climate index, an index gauging lenders' profitability and industry confidence, rose to a record 69 as banks' earnings were boosted by rapid loans growth and widening interest margins, the central bank said.

To contact the reporter on this story: Luo Jun in Shanghai at jluo6@bloomberg.net

To contact the editor responsible for this story: Bruce Grant in Hong Kong at bruceg@bloomberg.net


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