Chinese regulators have told some banks temporarily to halt lending amid growing fears of asset bubbles and inflation.  The renewed efforts to rein in credit growth after a burst of frantic lending activity by Chinese banks that have raised concerns about overheating in the Chinese economy.  

The crackdown prompted stock market falls around the world as investors worried that China’s tightening could cool its strong growth and dent expectations for the global recovery In the first two weeks of January alone, Chinese banks extended as much as Rmb1,100bn ($161bn) in new loans, analysts and bankers told the Financial Times. If banks were to sustain that pace of lending, they would pump nearly Rmb30,000bn into the economy this year. That would equate to four times the Rmb7,500bn annual target for new loans announced on Wednesday by Liu Mingkang, chairman of the China Banking Regulatory Commission.

In response to the lending spike, the regulator has issued verbal “guidance” to all banks, imposing lending quotas and warning the most aggressive lenders temporarily to halt loans, according to several banking executives.  Source: Financial Times

BIIA Newsletter March I – 2010 Issue