BEIJING, Nov 26 (Reuters) - Chinese banks are likely to lend 5-8 trillion yuan ($730 billion-$1.2 trillion) next year, a senior lawmaker said on Thursday, suggesting that credit growth could fall well below both the 2009 total and market expectations.
Banks answered the government's call this year to issue a flood of credit to help fight off the global financial crisis, putting them on track for a record of about 9.5 trillion yuan in new loans.
Few analysts think that level is sustainable, but forecasts for next year have centred on a range of 7-8 trillion yuan as many infrastructure projects started this year will continue to have big financing needs.
But Yin Zhongqing, deputy head of the finance and economic committee under the National People's Congress, said the threshold for maintaining sufficient liquidity could be a good deal lower.
"It is hard to continue (to support the economy) if new loans are below 5 trillion yuan next year, but a level higher than 8 trillion yuan will pose serious inflationary pressure," he told Reuters.
"I think 5 to 8 trillion yuan in new loans next year would reflect the appropriately loose monetary policy," he said.
Yin's committee holds no direct responsibility for monetary policy but has input into government policy-making.
Establishing a loan target for next year is expected to be an important agenda item at the government's Central Economic Work Meeting. The annual gathering, convened to lay out priorities for the year ahead, is due to take place in the coming weeks.
The loan target itself, though, may only be a rough guideline. The government aimed to have "at least" 5 trillion yuan in new loans this year, a mark it has nearly doubled.
Underscoring that point, Yin said the focus of monetary policy next year would be on improving the loan structure by lending more to smaller firms, and not on capping the total amount of loans.
The wide M2 measure of money supply should rise by 20 percent next year, he said. That rate would be well below the record 29.4 percent annual growth clocked in October but above the government's target of 17 percent growth in past years.
Yin added that the central bank would have little scope to adjust interest rates in 2010 and would instead concentrate its efforts on open-market operations.
That echoed an opinion piece in the official China Securities Journal on Wednesday, which said that Beijing might choose to raise banks' reserve requirements next year rather than interest rates to strengthen liquidity management.

($1=6.826 Yuan)

(Reporting by Xie Heng, Aileen Wang and Simon Rabinovitch; Editing by Jonathan Hopfner)

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