CBRC Puts Brakes On Major Lending Projects
The CBRC (China Banking Regulatory Commission) has put
a hold on lending to major construction projects in the
aluminum and cement sectors, government buildings, expressway
construction, golf courses, exhibition centers and logistics
parks. China's rapidly growing economy has led to increased
lending to many large projects which show little chance
of becoming profitable.
The Chinese government watchdog agency also said that
it would begin investigations into all loans for fixed-asset
investment deals awarded before March 2004 and requiring
capital of more than 30 million yuan (3.6 million dollars).
The CBRC
has also asked foreign banks to provide detailed information
on clients that have obtained credit lines of over 100
million yuan (12 million dollars) as part of aims to make
sure companies do not flout the rules.
The hard line by CBRC highlights the limited number of
tools available to the government to limit the growth
of the economy, which is now a mixed economy, with some
socialist management methods, and some capitalist characteristics.
While the banking sector is almost wholly state-owned,
local bank branches have been making large loans to local
city and provincial governments for many high-profile,
prestige projects. Too many provincial and city governments
have been involved in projects to build the biggest this
and the tallest that, resulting in projects which really
do not lift the economy and standard of living. Recent
corruption
scandals have shown how much power and authority local
bank managers have to make loans. So far, the government
has not been able to tighten up banking management to
curb bad loans.
At the same time, the government is pushing ahead to
bring China's leading banks to overseas listings, at a
time when many on Wall Street and other overseas markets
have questions about corporate governance in Chinese state-owned
enterprises.
Addressing these questions about corporate governance
and management transparency will be a major challenge
when these major Chinese entities do their road shows.
Eventually, there will need to be substantive , not just
cosmetic changes.
It's just a question of time.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
