Aug. 25 (Bloomberg) -- The People’s Bank of China sold 50 billion yuan ($7.3 billion) of one-year bills to yield 1.7605 percent, keeping its benchmark money-market rate unchanged for a second week to help support economic growth.
The yield has climbed 26 basis points since the central bank resumed issuing the maturity on July 9 after an eight-month suspension. Loans in July dropped to less than a quarter of levels the previous month, signaling the PBOC’s efforts to slow investment by offering higher bill rates is bringing results.
“Banks have ample cash to buy the central bank bills after their loan growth slowed last month,” said Chen Jianbo, a Beijing-based fixed-income analyst at BOC International Holdings, the investment banking unit of Bank of China Ltd. “The central bank won’t keep tightening in the money market unless it expects bank loans will rebound or the risk of inflation returning.”
The central bank also withdrew 10 billion yuan from the banking system today through 28-day repurchase arrangements at a rate of 1.18 percent, also unchanged for a second week, according to a statement on the PBOC’s Web site.
‘Excessive Liquidity’
Chinese Premier Wen Jiabao said yesterday the government will maintain its fiscal and monetary policies as the economic recovery isn’t stable yet and faces many “uncertainties.”
China Construction Bank Corp. said excess cash in the banking system has led to asset bubbles, underscoring concern that the nation’s lenders will rein in credit.
The Shanghai Composite Index has declined 17 percent from this year’s high reached on Aug. 4, paring gains for 2009 to 59 percent.
“There are uncertainties in the economy and bubbles in the capital market,” Guo Shuqing, chairman of the nation’s second- largest bank, told reporters in Beijing yesterday. “China’s banking system still has excessive liquidity.”
Banks’ lending in July was 355.9 billion yuan, down from 1.53 trillion yuan in June and a record 1.89 trillion yuan in March. China’s consumer prices fell 1.8 percent last month from a year earlier, the biggest slide since 1999, the statistics bureau said on Aug. 11.
