Seizing on tightening measures
By Diao Ying (China Daily)
Updated: 2008-03-07 07:37

China's tightening macro controls are both an opportunity and a challenge for banks, said bankers yesterday.

"The recent measures taken by the central bank are in line with the economic situation that China faces now, and we think they make sense," said Ma Weihua, president of China Merchants Bank and a CPPCC member.

China will this year shift monetary policy from "prudent" to "tight", and many banks will have to rein in their loans, which will constrict the banking business. But it is also a chance for banks to adjust their development structure, said Ma.

"2008 will be a challenging year for small and medium-sized banks, and we will try to maximize the benefits of limited resources."

Macro controls will indeed have some adverse effects. For instance, clients of many banks will be faced with risks of lower credit in the face of tax rebate cuts, environment protection costs, and rising labor costs.

But it is also an opportunity for banks to optimize their loans and give them to the most deserving candidates.

"We tend to choose small and medium-sized enterprises and the really good ones who lack money," said Ma.

The bank has started to control the scale of loans since last year. "We have kept our loans to a certain level, with no sudden spurts or falls," said Ma.

Capital bulge of a bank doesn't simply rely on the scale of loans, it also comes from business expansion, Ma said. China Merchants Bank will thus also transform more of its capital into bonds to reduce credit problems so that it can increase income from intermediate services and reduce the consumption of capital.

The bank is also developing many new businesses, such as wealth management products and services, Ma said.

The bank is considering the rural market as well. "Rural financing in China has been fragile, and there is large potential for its development."

Tang Shuangning, chairman of China Everbright Bank and a CPPCC member, yesterday said there is excess liquidity in cities, but a shortage in rural areas because of a lack of market demand. Tang, therefore, suggests banks and the government could channel some capital into these areas to further balance the economy.

(China Daily 03/07/2008 page13)