China Begs Banks To Cut Back On Lending

Perhaps China has finally realised its artificially inflated quantitative easing dream can’t go on forever.

In the past, they’ve tried to encourage banks to lend more prudently, but they might actually enforce some hard and fast rules.

NYT: Chinese banking regulators are putting pressure on the country’s banks to raise more capital and temper their rapid growth in lending, in the clearest signs yet of official concern about the sustainability of the nation’s credit boom, senior Chinese bankers said Monday.

Essentially, it boils down to capital requirements for Chinese banks.

Under pressure from the government to offset the drag on the Chinese economy from plunging exports, Chinese banks lent more money in the first seven months of this year than in the two previous years combined. They have only gradually begun to moderate their pace of new loans this autumn.

Reuters, citing a source, reported Monday that the China Banking Regulatory Commission was asking big banks to raise their capital adequacy ratios to 13 per cent by the end of next year, compared to a broad industry average of 11 per cent in China now. The commission denies this.

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