More Tightening Measures in China

Chinese regulators have told some banks to temporarily halt lending, according to FT.

In response to a lending spike, the Chinese bank regulators have issued verbal “guidance” to all Chinese banks, imposing lending quotas and warning some of the most aggressive lenders to temporarily halt loans, according to several banking executives.

At least two banks – Bank of China and Agricultural Bank of China – have issued orders to lower level branches to stop issuing loans to corporate customers without explicit approval from their headquarters, employees at those banks told the FT.

A state-run newspaper on Wednesday cited unnamed banking sources as saying some banks has been told to stop all lending for the rest of January and that Bank of China, which has been the most aggressive lender among the large state banks, has switched off its internal electronic loan approval system.

Since, money printing in China was aggressive, it is still not clear to what degree money printing has been slowed. It will be a month before data will provide indications of how serious of a monetary tightening is going on in China.

Speaking in Hong Kong on Wednesday, Liu Mingkang, chairman of the China Banking Regulatory Commission, forecast that banks would issue Rmb7,500bn in new loans this year. That would mean a rise of 16-18 per cent in total outstanding loans on an annual basis and would mark a sharp deceleration from the 32 per cent rise in 2009.

If this type of slowdown does occur, it will mean a huge crash in the Chinese asset bubble, including the Chinese stock market.