China central bank governor says will step up credit support to economy

FILE PHOTO: Governor of People's Bank of China (PBOC) Yi Gang attends a news conference on China's economic development ahead of the 70th anniversary of its founding, in Beijing, China September 24, 2019. REUTERS/Florence Lo

BEIJING (Reuters) - China will step up credit support to the economy and push real lending rates lower, central bank governor Yi Gang said on Tuesday, as policymakers keep monetary policy accommodative to prop up slowing growth.

Authorities will promote capital replenishment and boost banks’ ability to increase lending, Yi told a meeting with representatives from commercial banks, adding that lenders should reference the Loan Prime Rate (LPR) when it comes to setting lending rates.

The People’s Bank of China (PBOC) is likely to lower the LPR on Wednesday for the third time since it introduced the benchmark in August, according to a survey of traders and analysts.

Pressured by slowing global demand and a bruising trade war with the United States, China’s gross domestic product rose just 6.0% year-on-year in the third quarter, the slowest clip in nearly 30 years and at the lower end of the government’s 6.0% to 6.5% target range.

The meeting on Tuesday acknowledged challenges to the stable operation of the macro economy and the financial sector and that downward pressure on economic growth continues to increase while credit contraction pressure still exists in some regions.

Yi said countercyclical adjustments to the economy will be stepped up and the government will ensure growth in money supply and social financing in line with nominal GDP growth.

Since authorities boosted support to the economy this year, the monetary policy transmission mechanism has been improving and the growth in money supply and social financing came in slightly higher than nominal GDP growth, the meeting said.

Representatives from Industrial and Commercial Bank of China 601398.SS, Agricultural Bank of China 601288.SS, China Construction Bank 601939.SS and others were present at the meeting.

(This story corrects PBOC is likely to lower LPR this Wednesday, not next Wednesday, in paragraph 3)

Reporting by Beijing Monitoring Desk and Stella Qiu; Editing by Catherine Evans