China's Li Asks Banks to Supply More Long-Term Loans for Economy

(Bloomberg) -- China’s Premier Li Keqiang warned against risks related to rapid increases in short-term lending, and said banks should supply more long-term loans for the real economy.

• He reaffirmed that the nation’s prudent monetary policy won’t change, and the government won’t "flood" the economy with excessive liquidity, according to a statement published on the State Council website

Key Insights

• Li made the remarks at a State Council meeting Wednesday
• "Our recent monetary policy, although it has won positive comments overall from the outside especially from market players, has also raised questioning on whether it is QE," Li said. "I’d reaffirm here the prudent monetary policy hasn’t changed and will not change. We are firmly against flooding the economy"
• The People’s Bank of China cut the amount of cash banks must hold as reserves by 100 basis points last month, stepping up the efforts to bolster bank lending. Credit growth exceeded expectations in January, with aggregate financing jumping to 4.64 trillion yuan ($690 billion)
• The significant rise in bill financing last month has supported the real economy, and the use of bill discounting in arbitrage by some companies wasn’t the main reason for the credit increase, according to PBOC officials cited in a report on Financial News, a newspaper backed by the central bank

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• China sees record credit growth amid seasonal surge and support from shadow banking

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