Yesterday, the yield for the CNY 20 billion one-year central bank bills went up 8.29 base points to 1.8434%, versus 1.7605% ever since August 11, 2009, thus beating the original market expectation. In the meantime, the central bank started the repurchase operation in the open market, with the amount of CNY 200 billion and the duration for 28 days, which is the first time for PBOC to carry out such a large-scale repurchase ever since October 2008.
According to an analyst with Guotai Junan Securities Co., the issue rate of the central bank bills is expected to keep on rising in the coming several weeks and might reach between 2.0% and 2.1% circa the Chinese traditional spring festival.
As for the reason why the Chinese central bank adjusts up the interest rate of the central bank bills at the start of the year, China International Capital Corporation (CICC) said in a report that PBOC is understood to control fast loan expansion at the beginning of the year via the move. In addition, the central bank is just out of the purpose to control the expectation for inflation.
On the same day, CITIC Securities Co. adjusted the CPI growth rate for 2010 from 2.6% up to 3.2%, saying that the expectation for inflation will become stronger with the further recovery of the Chinese economy. The central bank thus is guessed to raise the benchmark interest rate in the middle of the year.
The Chinese banking institutions are to see the new incremental loans grow between 17% to 20% this year to about CNY 7 trillion; and China's credit structure in 2010 might be a little bit different from that in 2009, when there are CNY 9 trillion new incremental loans.
This year, the urban investment in fixed asset is expected to grow 25% and reach CNY 24 trillion. Based upon 17% bank loans as the source of such investment, there will be CNY 4 trillion loan increment in this sector.
As for which sectors these new incremental loans will be provided in the year, some experts guessed that one is the government-backed project and the other is the retail loan; while economist Ma Jun with Deutsche Bank guessed the infrastructure loans will likely to reduce while the consumption loans are going to increase.
(USD 1 = CNY 6.82)
