Major China banks begin tightening credit

Regulators' pressure prompts BOC and CCB to put up measures to curb lending.

Bank of China Ltd. has stopped extending new corporate loans in the Shanghai area, except for clients who have repaid earlier borrowings and applied for new credit, said a person familiar with the matter who declined to be identified. China Construction Bank Corp.'s branch in the city has been told to screen applications for personal loans and mortgages more carefully and to stop new lending once a monthly quota is met, another person said.

China's benchmark stock index fell to a three-month low on 26 January on concern a government clampdown on lending will slow the world's third-largest economy. Credit Suisse Group AG said in a note recently that a countrywide lending halt that started 19 January may trigger a “meaningful” decline in manufacturing, according to a report in Business Week.

The central bank has also moved to curb credit, ordering banks on 12 January to raise the ratio of deposits they hold in reserve, limiting the amount of cash available for lending. The People's Bank of China has also instructed lenders including China Citic Bank Corp. to boost their reserve ratios by an additional 0.5 percentage point, Reuters reported last week.

Chinese banks advanced 1.45 trillion yuan ($212 billion) of loans in the first 19 days of this month, the 21st Century Business Herald reported on 26 January, without citing anyone. That's equivalent to 19 percent of the CBRC's full-year target.