Banks urged to rein in loans for overheated sectors
(Xinhua)
Updated: 2004-04-30 23:12

China's banking watchdog Friday ordered commercial banks to pull back on loans extending to rush investment and copy-cat construction in an effort to guard against new problem debts and inflation.

The China Banking Regulatory Commission (CBRC) said in a circular that banks should make responses to the country's macro-economic adjustments by rationally controlling the amount of loansfor overheated sectors including iron and steel, aluminum, cement,real estate and automobile.

But further strong support should be given for projects in compliance with the nation's industrial policies and market access conditions so as to avoid big ups and downs in credit extension, it noted.

And loans should especially go to public facilities and capital projects in the fields of coal, electricity, oil, transport and water supply, a bottleneck for China's economy, said the CBRC.

Much of the country's economic picture remained rosy, analysts said. Growth clocked in at 9.7 percent in the first quarter of the year, higher than the official target of 7 percent for 2004.

But Zheng Jingping, spokesman of the National Bureau of Statistics said earlier this month that fast growth of capital investment was one of the protruding problems that troubled the economy. As the investment rocketed 43 percent, the consumer priceindex, a widely watched barometer on inflation, rose 2.8 percent year-on-year from January to March.

Bolstering China's economy is torrid bank lending, encouraged by interest rates at 25-year lows. The official cost of borrowing in China has remained unchanged since February, 2002, when rates were reduced to the lowest levels since China embarked on reform and opening-up drive more than two decades ago.

On Friday, the CBRC also required commercial banks set enough provisions for bad loans and maintain capital adequacy ratios up to standard as part of the efforts to earnestly ward off loan risks.

It ordered local CBRC bureaus to perform their supervision duties well in accordance with law.

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