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China relaxes loan curbs amid blizzards
2008-02-02
China has ordered financial institutions to provide emergency loans to businesses and individuals hit by the snow storms and power cuts that have paralysed swathes of central and southern China. The emergency directive could bring a speedier than expected end to the credit squeeze instituted in recent months to fight inflation and cool a number of sectors of the economy, especially the property market. The move came as Xinhua, the official news agency, reported on Friday that more than 160 cities and counties were still suffering power and water shortages. The directive, issued by the People's Bank of China late on Thursday, in effect "announced that the credit tightening since end-October 2007 is temporarily over for many sectors", said Ting Yu, of Merrill Lynch, adding that the move showed the PBoC thought its most important task now was "to guarantee the normal functioning of the economy, instead of inflation and overheating, the two key words repeated over and over in the past quarter". China economists had already brought forward their estimates for an easing of credit restrictions in the wake of the global financial turmoil, the prospect of a US recession and slowing local exports. However, Beijing faces conflicting pressures, with inflation, which hit an 11-year high in November, expected to rise even further in January and February because of the damage to crops and transport bottlenecks caused by the extreme winter weather. Before the cold set in, the government had attempted to buy time in its fight against inflation by trying to reimpose long-discarded price controls on food and other measures. However, the state's attempt to manage prices has exacerbated the turmoil by setting the coal and power industries against each other. One of the areas worst afffected by the weather has been Chenzhou, in Hunan. Its population of 4m has had no water or power for a week. An official at the local power station, itself without power, said electrical towers and cables had collapsed under the weight of snow and ice. Three local repairmen had been killed trying to repair the lines, including one who fell unconscious from sheer exhaustion while working on one of the towers after toiling for days without rest. "We are all very anxious. I am now using a torch at work," the official said. In Guangzhou, where up to 850,000 migrant workers have been stuck waiting for railway lines to clear, the situation began to ease on Friday as more regular operations returned. Thousands of people began streaming into the station in the morning, relieving a crush that had built up on Thursday, and about 200,000 people were expected to pass through the station. One young man, who identified himself only as Mr Qin from Chongqing, a huge interior metropolis, held up a desperate, hand-written plea for tickets to get home for his wedding. "We were supposed to get married before the new year," he said, "but I don't think I can make it in time."
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