Bloomberg News

Chinese Bankers' Confidence Holds Near Record Low

December 20, 2007

Chinese bankers' confidence held close to a record low as concern lingers that the economy will overheat, according to a survey by the central bank.

An index tracking the confidence of 2,850 heads of financial institutions rose to 24.1 in the fourth quarter from a low of 21 in the previous three months, the People's Bank of China said in a statement on its Web site today. Below 50 indicates they think the economy will slow.

The index came in at the second-lowest reading since the central bank started compiling the data four years ago. More than fourth-fifths of the bankers thought the economy is overheating, or 81.3 percent, down from 83 percent, the central bank said.

Chinese leaders and officials at a conference earlier this month said an overheating economy and inflation are key risks for 2008. The world's fourth-largest economy expanded more than 11 percent during the past three quarters.

More than half of survey respondents expect monetary policy to be tightened next quarter and almost 60 percent of bankers forecast another interest rate increase, the survey showed.

The government is targeting banks, whose pretax profits rose an average 71 percent in the first half, as it tries to slow investment in factories and real estate. The central bank has increased the amount banks must set aside as reserves 10 times this year, to reduce funds for lending, and raised interest rates five times.

Higher interest rates have curbed demand for loans as the index that tracks borrowing needs dropped to 66.8 in the fourth quarter from 69.4 in the previous three months.

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

To contact the editor responsible for this story: Philip Lagerkranser at at lagerkranser@bloomberg.net


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