China Clamps Down Further On New Bank Lending

Another rise in banks’ reserve requirements to rein in credit expansion. That’s the second within a month and a sign of the growing concern among authorities about the potential for stimulus-inflated stock and real estate bubbles and the accompanying bad bank debt. This time the increase in required capital reserves ratios is another half a percentage point, taking it to 16.5%. The ratio for smaller institutions, such as rural credit cooperatives, is left unchanged at 14.5% in order to keep credit available to farmers, the People’s Bank of China announced.

The new reserve requirements come a day after the government reported that new bank lending in January, at 1.4 trillion yuan ($200 billion), though down 14% on a year earlier had already reached nearly one fifth of the year’s planned total of 7.5 trillion yuan. Lending is usually heavier in the earlier months of the year, but authorities don’t want the annual target blasted through as cavalierly as it was last year.

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