* PBOC seeks to maintain appropriate credit, social
* Signs that growth is stabilising, risks remain -c. bank
* Central bank will hike two-way float of yuan exchange rate
* C.bank tells lenders to set reasonable pace
(Updates with PM Li, c.bank comments)
BEIJING, Jan 17 China's central bank on Friday
urged commercial lenders to strengthen liquidity management and
set a reasonable pace on lending, even as it pledged to adjust
liquidity to help maintain appropriate credit growth this year.
Rising money market rates and bond yields in recent months
indicate the People's Bank of China is committed to curbing high
debt levels in the economy to head off potential financial
risks, but there is little sign of abrupt policy tightening.
"We will use various liquidity management tools in a
flexible way and improve the system to appropriately adjust
liquidity to maintain reasonable growth in credit and social
financing," Zhang Xiaohui, head of the central bank's monetary
policy department, wrote in the China Finance magazine, run by
the central bank.
The PBOC has pledged to keep monetary policy largely stable
this year with timely fine-tuning in line with economic changes.
The central bank warned in a statement after a meeting on
money and credit conditions that commercial banks were still
keen to expand loans, which have grown rapidly in January.
"Demand for cash will rise significantly as the Spring
Festival is approaching," the central bank said on its website,
"Monetary and credit departments will issue timely risk
alerts and guide financial institutions to strengthen liquidity,
asset and liability management and reasonably set the pace on
lending to prevent assets from expanding too quickly," it said.
China's money rates jumped this week as liquidity dried up
ahead of the Spring Festival holiday, with traders watching to
see if the central bank would maintain its passive stance and
allow another cash crunch to unfold.
Analysts believe the central bank is likely to make measured
use of policy tools, such as short-term liquidity operations
(SLO), to help lenders weather sporadic cash strains this year.
The Shanghai Securities News reported on Wednesday that the
top four state banks speeded up new lending in January, handing
over 320 billion yuan ($52.8 billion) in the first 12 days of
the month, versus 270 billion over the same period a year
The newspaper also cited sources saying new loans could top
1 trillion yuan in January.
China's potential growth rate is falling as the population
ages, and the economy faces increased resource and environmental
constraints and other structural problems, Zhang said.
The central bank must strike a balance between promoting
growth, structural adjustments and reforms, while preventing
financial risks, she said.
"Faced with these new situations and new problems, the
People's Bank of China has always paid attention to
appropriately handling liquidity management and interest rate
changes, neither relaxing nor tightening monetary policy," she
Since late June, commercial banks have gradually adjusted
their asset and liability management models to ease mismatch
problems and slow interbank business, she added.
The reformist central bank was accused of worsening June's
market turbulence by keeping the purse strings too tight. But it
has since sought to improve its communication with the market.
Demand for cash is strongest near the end of each quarter as
banks rush to meet regulatory requirements, such as
loan-to-deposit and reserve ratios, and pay out maturing shadow
financing products - a factor that has worsened cash crunches.
The PBOC will push financial reforms, including widening the
issuance of interbank certificates of deposit (CD) and
increasing the two-way float of the yuan, Zhang said.
There are increased positive signals in China's economy amid
signs that growth is stabilising risks and challenges remain,
Premier Li Keqiang said on Friday the government would keep
economic growth within a reasonable range, state radio reported.
($1 = 6.0557 Chinese yuan)
(Reporting by Kevin Yao; Editing by Jacqueline Wong)