China tells banks to ease up on lending

Scott Tong Jan 20, 2010
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China tells banks to ease up on lending

Scott Tong Jan 20, 2010
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Bill Radke: In China today, there are reports the major banks were told to cool it on the lending so as not to overheat the economy. From Shanghai, Marketplace’s Scott Tong reports on taking away the punch bowl, China style.


Scott Tong: China’s top bank regulator told the banks to get stingier with the credit this year. Last year, total loans in China rose 32 percent — that was the guts of the country’s stimulus package. This year’s increase may be half that. Also today, a major Chinese bank reportedly halted all loans for the rest of January.

David Cohen is with Action Economics in Singapore:

David Cohen: They want to ease off of the accelerator a little bit after implementing a rather aggressive stimulus package over the past year or so.

The fear is the feverish lending is creating asset bubbles and inflation, and a lot of loans that will never get paid back. Investors are still awaiting the big tapping of the brakes: an appreciation of the Chinese currency. Beijing controls that. And Cohen says today’s draining of money from the economy means a currency boost can’t be far off.

Cohen: News like this, you know, tends to push forward the time of arrival.

Boosting the currency would slow Chinese exports. Cooling the economy, but hurting factories in the process.

In Shanghai, I’m Scott Tong for Marketplace.

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