China will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets while keeping the country’s economic recovery on track, a top regulator said yesterday.
China’s banking system is healthy despite last year’s explosive growth in credit and regulators could manage the risks, said Liu Mingkang (劉明康), chairman of the Chinese Banking Regulatory Commission.
“We are confident that risks envisaged could be well absorbed,” Liu said at a financial forum in Hong Kong.
PHOTO: REUTERS
Record bank lending last year to support government spending on infrastructure and other projects under Beijing’s stimulus package has led to fears of asset bubbles and huge bank losses if too many loans turn sour.
After handing out some 9.5 trillion yuan (US$1.39 trillion) in loans last year, banks were expected to scale back lending to roughly 7.5 trillion yuan this year, Liu said.
This year, the total amount of loans will grow by as much as 18 percent year on year, compared with nearly 32 percent last year, he said.
“This year, we will continue to control the pace and demand of the credit supply,” he said. “We shall control, and we have controlled, the credit growth the whole year round.”
Already, “corrective actions” have been taken against banks that lent too much or made bad loans to root out “excessive” exposure, consumer credit card risks and other problems, he said.
Regulators were paying special attention to loans for local government projects and real estate. All banks have been ordered to “heighten their vigilance against an impossible, embedded credit risk,” Liu said.
New leverage and liquidity restrictions would be imposed, he said.
Meanwhile, IMF managing director Dominique Strauss-Kahn reiterated yesterday his call for China to boost the value of its currency, the yuan, as critics accuse Beijing of keeping the unit artificially low to boost exports.
Strauss-Kahn played down fears about an asset bubble forming in China and the wider region, a growing worry as regional property prices surge, but Asian countries should usher in temporary capital controls as a response to the massive amount of foreign money flowing into their economies, he told the Asian Financial Forum in Hong Kong.
The region must also look at boosting domestic demand to cut its reliance on foreign consumers, especially in the hard-hit US, he said.
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