CHINA’S central bank governor pledged to keep the growth of money supply in check and offer better support to key sectors including technology and advanced manufacturing, illustrating the nation’s focus on enhancing the quality of credit.

Pan Gongsheng reaffirmed that the People’s Bank of China will “control the monetary sluice” in an article in the People’s Daily yesterday that laid out the central bank’s priorities.

Officials have used the language in the past to underscore the central bank’s desire to avoid massive easing leading to a rapid buildup of debt.

The central bank will enhance the efficiency of existing loans, Pan wrote in the newspaper, saying that “some enterprises have occupied a large amount of financial resources inefficiently.”

He also reiterated the central bank will step up support to strategic sectors like tech, manufacturing and private firms.

The language indicates “the central bank will unlikely let loose the floodgate of credit, and it will instead optimize the quality and structure of credit,” said Bruce Pang, chief economist for greater China at Jones Lang LaSalle Inc.

The central bank may utilize more structural policy tools to guide funds into targeted areas, Pan said.

That view is in line with the central bank’s recent guidance for banks to cap the amount of new loans they issue in early 2024 and shift some forward to this year.

The central bank also foreshadowed a slowdown in credit issuance when it highlighted rapidly growing new loans in key sectors like tech in a policy report last week.

Sheng Songcheng, a former statistics and analysis director of the People’s Bank of China, said in comments reported by Shanghai Securities News on Sunday that China is likely to implement proactive fiscal policy next year as there is still a need for the world’s second-biggest economy to realize stable growth.

“It is expected that next year China will continue to implement positive fiscal policy, monetary policies that are in line with positive fiscal policy, with a relatively large policy space to lower the reserve requirement ratio,” Sheng said.

With interest rates and loan prime rates at low levels, there is more space to cut banks’ reserve requirement ratio (RRR) than to cut interest rates, Sheng said.

The central bank lowered the RRR in September for the second time this year to boost liquidity and support economic recovery. Analysts expect another cut by year-end.

(SD-Agencies)