China instructs financial leaders to increase lending and reduce debt risks
China’s central bank and financial regulators met with bank leaders and told them to make more loans to help the economy recover. This is another sign that officials are getting more worried about the worsening economy.
A statement from the central bank on Sunday said that officials from China Life Insurance Co. and stock markets were also at the meeting on Friday. At the meeting, the government talked with the financial sector about ways to avoid and lower local government debt risks.
Ads by The People’s Bank of China cut a key interest rate by the most since 2020 last week, which was a surprise. They did this to help the economy, which is facing new threats from a worsening property slump and low consumer spending.
The unexpected move happened right before the release of bad economic data for July, which showed that growth in consumer spending, industry output, and investments all went down and unemployment went up.
The statement says that big financial institutions, especially big state-owned banks, need to give out more loans and avoid big changes in lending. In July, Chinese banks gave out the least amount of loans each month since 2009. This is another sign of weak demand in the economy, which raises the risk of downward pressure lasting for a long time.
The central bank said that regulators and financial institutions need to work together to lower risks related to local government debt and improve tracking.
The statement says that China must take strong steps to avoid structural risks. The central bank said again that the government will improve credit policies, but it didn’t say how.
Officials have shown that they are worried about the real estate market, where another big developer is facing a debt problem and home sales keep going down. Risks are also moving to the financial sector, where an affiliate of a large financial conglomerate with ties to the real estate sector missed payments on some investment goods.
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