No ban but better risk management on new lending by China
Following yesterday's news in the market that
China has decided to implement credit restrictions and ban new lending in order to cool down the rapid economic growth, some press reports today quoted Chinese banking officials denying such action.
The earlier reports referred to certain precautions taken by the Chinese government in order to control
investments and new projects for steel and cement industries. Last Wednesday, a state-run
China Securities Journal report stated that the
China Banking Regulatory Commission told commercial banks to stop lending before the week-long May Day holiday, starting from May 1. In line with such statement, mining and metal stocks plunged yesterday. However, according to several press reports, such action has been officially denied by the Chinese banking officials and the
China Banking Regulatory Commission. It is stated that no such notice by Chinese banks were issued to halt new loans.
It appears that
China is willing to take the pace of economic growth under control, trying to urge companies to invest their own money rather than going for new bank loans particularly for projects in sectors such as steel, cement and
construction with the new bank loan annual growth having reached almost to 40%. An increase of interest rates might still be ahead, however prior to getting there the credit policies of banks are endeavored to be kept in line with the governments development targets.