Chinese Banks Ordered To Suspend Lending
Chinese banks have suspended lending until May 1, pending
Chinese government announcements regarding lending policy.
The banks affected by the move are Bank of Communications,
Shanghai Pudong Development Bank, Shenzhen Development
Bank and China Merchants Bank.
Bank officials said that the order had come from "the
very top".
The past few weeks have shown increased signs of worry
that the Chinese economy is overheating, with almost uncontrolled
lending to investments which show little chance of showing
good return on investment. The China
Banking Regulatory Commission , which is the government
regulating body for the industry, has denied that it has
ordered the banks to stop lending.
However, the Chinese media has been full of unsubstantiated
reports that the Politburo, the senior political organization
in China, has ordered that banks to curb profligate lending.
If this is true, this would be the first time that this
political body has made an order to control what is essentially
a serious economic problem from developing into a social
and economic problem
Speculation is that the order came from the Politburo
when it saw initial bank lending numbers for the month
of April.
If the reports are true, the move will have serious repercussions
for the CBRC. A direct administrative order from the Politburo
to China's state-owned banks would effectively undercut
the authority of the China Banking Regulatory Commission
in regulating the industry. In effect, it would mean that
the CBRC has not effectively performed its regulatory
job.
The official media has lately given increased coverage
to tightened lending rules. Companies are now required
to provide 40 percent of the capital for steel projects,
and 35 percent for cement, aluminium and property projects.
Formerly, all required 25 percent.
Bank officials who have approved major lending projects
in violation have also been punished. In one case, a Bank
of China branch manager was punished for approving a 10.5
billion yuan steel project in Jiangsu province. The story
was broadcast on CCTV (China Central Television) nationwide.
May 1 is Labor Day in China, and marks the beginning
of a one-week national holiday. Normally, little business,
except domestic and foreign travel, is conducted during
the week.
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