China regulator urges banks to readjust lending

Lenders asked to practice strict control on lending for construction raw materials to avoid loan overcapacity.

As the country begins to phase out obsolete production methods in an economic restructuring drive, industries with overcapacity are likely to face even tougher financing terms this year.

In response to the government call to curb excessive capacity, the banking regulator earlier this year asked lenders to maintain strict controls on loans flowing into industries including steel, cement, plate glass, shipbuilding, electrolytic aluminum, the chemical processing of coal and polysilicon.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said that commercial lenders should readjust their credit structures to support the country's industrial upgrading and restructuring drive.

"Loans to industries with overcapacity were growing at a significantly lower pace last year compared with that of the overall credit expansion," he said. Given that the country was considering an exit from the loose monetary policy implemented to counter the financial crisis last year, analysts said credit avenues for industries listed on the government "blacklist" were set to be limited. The Chinese government is targeted to give out 7.5 trillion yuan ($1.1 trillion) in new loans this year, lower than the record 9.59 trillion yuan ($1.4 trillion) lent in 2009.

View the full story in Xinhua.