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Outstanding loans on the decrease

CHINA reported a net decrease in outstanding loans in the first two weeks of April, suggesting that banks are starting to tighten their scrutiny of lending.

Outstanding loans fell by a large amount in the first two weeks of April, the Shanghai Securities News said today, quoting unidentified sources.

It reported that the outstanding loans of the big-four state-owned banks dropped by about 90 billion yuan (US$13.2 billion) in the first two weeks of the month.

The report said the People's Bank of China had initially aimed at delivering new loans worth 6 to 7 trillion yuan this year. Thirty percent of this would be delivered in each of the first two quarters and twenty percent each would be delivered in the last two quarters.

Banks in China extended 4.58 trillion yuan of new yuan currency loans in the first quarter, heading towards China's original total year credit target of more than 5 trillion yuan.

Analysts said that many banks tended to bunch much of their lending into the latter part of a month as credit officers were under pressure to meet monthly quotas, and this suggested that the credit surge may not be a real indicator of economic recovery.

The injection of liquidity has helped fuel the country's economy as China's economy expanded 6.1 percent in the first quarter with a raft of positive economic indicators spanning industrial output and retail sales.

However, the surging credit also caused concerns about a future wave of bad loans, not only from analysts but from authorities as well.

Banking authorities are beefing up efforts to curb the loose supply of credit.
China is reportedly considering new rules regulating surging bank loans to ensure borrowing is not abused.

The new rules will be aimed at keeping loans from being diverted into asset markets or bank deposits.


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