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--Pressuring Banks to Lend To SMEs Is Ineffective: Former MPC Member Huang
BEIJING (MNI) - The People's Bank of China (PBOC) should avoid excess
financial intervention and allow a greater role for the market in determining
the flow of funds to the economy, a former member of the PBOC's monetary policy
committee said in an interview.
Huang Yiping pointed to both a crackdown on special funding vehicles and
shadow banking which has obstructed financing channels for local government
without providing effective sustainable alternatives, and to a drive by the PBOC
to boost lending at lower rates to small- and medium-sized enterprises as
examples of intervention which could prove counter-productive.
Huang, lead author of this year's Jingshan Report, published Saturday by
the China Finance 40 Forum, told MNI in an interview that the authorities have
impinged on too many of the market's functions, stalling the orderly allocation
of assets and putting a brake on growth.
Given the early signs of economic slowdown and a threat to exports from the
continuing trade spat with the U.S., the PBOC has had to shift its priority from
preventing risks to a "structural loosening," Huang said Saturday on the
sidelines of a conference hosted by CF40.
But pushing banks to lend to risky SMEs is not the answer.
"The problem should be dealt with in market-based ways, as banks are
reluctant to lend considering the losses they have to bear, especially given the
loan costs are very low," Huang said.
The central bank must avoid flooding the system with cash, looking to
return to a tightening bias when the economy steadies, returning the focus to
economic rebalancing, he said.
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