Clampdown on excessive lending in China

  • Business
  • Thursday, 12 Feb 2004

BEIJING: Chinese Premier Wen Jiabao has ordered a clampdown on excessive lending, the strongest call yet to tackle a problem that could undermine the country's economic growth and complicate key reforms of banks and state firms. 

The China Daily quoted Chen as saying at an annual meeting of senior financial officials that began on Tuesday that growth in 2003 was “excessively fast-paced” and should be scaled back this year. 

According to Wen, the heated lending poses risks to the health of the financial system, which Beijing is trying to reform with measures so far that include a US$45bil bailout of two major state-banks. 

Using strong language to back up his call for a clampdown on credit, Wen described many industrial projects as “excessive”, “unhealthy” and “unreasonable”. 

The remarks showed that worries over reckless lending that could create industrial overcapacity and possibly lead to bad loans and mass layoffs have reached the highest ranks of power. 

Earlier this week, China’s banking watchdog ordered a probe into lending to red-hot industries such as steel, cement and property. 

Fixed asset investment – covering spending on things like roads, power plants and factories – jumped 26% in 2003 over the previous year, hitting 5.5 trillion yuan (US$664bil), the report said. That was about half of China’s gross domestic product (GDP) and accounted for 46% of GDP growth, which hit an annual pace of 9.1%, it said. – Reuters

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