China’s banks asked to lend more to stimulate economy

China’s banks are encouraged to lend more to boost the economy, as mainland investors flocked to the ultra-long Treasury bills on the exchange debut yesterday.

The People’s Bank of China has guided some commercial banks to accelerate the pace of lending in May, four sources with knowledge of the matter said, after broad credit growth in April hit a record low.

Meanwhile, China’s Industrial & Commercial Bank of China (1398) and other state lenders are urging branch managers to lend to state-owned companies that buy unsold homes, offering a quick show of support for the government’s housing rescue package unveiled last week.

China’s first batch of 30-year Treasury bills, with an interest rate of only 2.57 percent once surged as much as 25 percent on the debut yesterday and triggered trading halts, as mainlanders are desperate for quality investments amid a volatile stock market and a cloudy economic outlook.

With an offer price of 100 yuan (HK$107.8) apiece, the prices of the notes once hit nearly 125 yuan in the Shanghai Stock Exchange before trading consumed from a second halt – a regime in which securities will be suspended trading immediately following a 10 percent jump in a single day in mainland markets. The yield, accordingly, dropped to 1.53 percent.

However, the bonds free-fell to 101.32 yuan in the last five minutes before the trading close in Shanghai, narrowing yesterday’s rise to only 1.32 percent, with a yield of 2.5 percent. They closed at 119.7 yuan in Shenzhen, 19.7 percent higher than the offer price.