The China Banking Regulatory Commission (CBRC) said yesterday its recent efforts to strengthen the supervision of banks and contain their lending risks have shown good results.

But it urged the banks to continue their efforts to implement the State's macroeconomic policies, and be strict with their lending decisions.

CBRC Chairman Liu Mingkang noted positive signs that emerged in the first four months of the year at a teleconference yesterday - monetary supply growth had subsided, new loans slowed their pace, the lending capacity of banks was restricted and China's international payments were basically balanced.

The performance of the economy and the financial sector seen in recent months demonstrated the State's macroeconomic measures were "prompt, correct and effective," and "the economic performance is heading in the direction of macroeconomic management targets," he said.

China's fixed investment continued 2003's sizzling growth to surge by 42.8 percent in the first four months of this year, prompting the government to stage further policy initiatives in the past two months, including some controversial administrative measures.

The fixed investment expansion was seen to have been fuelled by rapid credit growth, which had also led to worries about new bad loans being accumulated.

Since the latter half of last year, the government has taken a number of measures to cool down rapid fixed investment and loan growth, and slow down accelerating prices. There have also been three increases in the reserve requirements of banks, aimed at restricting their lending capacities.

The growth in both new loans and broad money supply started to show some signs of a slowdown this year, although they are hovering at high levels that have not been seen in recent years.

The central bank has said more time is needed before the effect of the more recent policy actions, mostly two reserve requirement rises, becomes evident.

Liu stressed yesterday that growth in fixed investment and bank lending remains in the fast lane, and called for attention to the potential risks in bank loans.

"We cannot be negligent with it, and need to remain on high alert," he said.

The CBRC has been urging banks in recent weeks to "study" the State's macroeconomic policies, which aimed to restrict new investment and bank loans in sectors believed to be over-invested; these include steel, cement, aluminium and some others.

It has also been announced that there will be a broad inspection into bank loans for fixed investment projects, which is expected to be completed next month.

Some domestic banks, especially the smaller joint-stock commercial banks, are believed by analysts to not have strictly followed the government's tightening policies as they eagerly pursued profits and a bigger market share.

Liu asked his colleagues at regional bureaus yesterday to keep a close eye on fixed investment and loan growth, and help banking institutions improve their lending risk management.

(China Daily June 4, 2004)