Central Bank Urges More Loans to Auto Sector

After the Chinese government unveiled its stimulus plan for auto and steel sectors last week, the central bank of China on Friday urged banks to lend more money to support the slumping auto industry, said xinhuanet.com yesterday.
 

The People's Bank of China calls for the establishment of more auto financing companies and encourages banks to cooperate more with them, the central bank's deputy governor Liu Shiyu said in a statement on its website (www.pbc.gov.cn), adding that auto loans will be instrumental in boosting auto sales in the Chinese market.

The move came after a wide-ranging support package released on Wednesday by the State Council, China's cabinet, which included tax cuts and subsidies to support the auto sector. Since August 2008 when the global financial crisis broke out, China's auto market has been slowing down and most auto dealers lack money for cash flow.
 

The central bank also stressed that auto dealers have to build up their own self-discipline to ensure that auto financing develops in a safe, sound manner. Banks are also urged to lend more money to the sluggish auto sector without sacrificing risk control. Auto dealers are expecting to get bank loans as soon as possible.
 

Loans to the auto industry totaled 158.3 billion yuan ($23 billion) in 2008, including 2 billion yuan in securities backed by loans to auto buyers. That was tiny compared to the 30 trillion yuan in overall local-currency lending by the end of the year.