China's largest bank, ICBC, said on Wednesday it has stopped rolling over some loans to slow credit growth after a surge at the start of the year, offering the latest evidence of a government-directed clampdown on lending.
In a statement issued after a week of reports and rumors of China's monetary tightening that have roiled global markets, the world's biggest lender by market value stressed that it would not halt new lending.
But given that Chinese companies typically borrow for short periods of as little as six months, and then roll the financing over, Industrial and Commercial Bank of China's move is tantamount to calling loans in.
"ICBC will not rush to lend, nor will it stop lending," the bank said.
"In the first 20 days of January this year, due to concentrated capital demand from ongoing projects, the bank's credit offering was a bit fast but was still below that of the same period last year," it said.
"In the last 10 days of January, due to the expiry and return of a concentrated volume of existing loans and repayment of credit card debt, loan growth has eased," it added.
World markets have been betting that China, the first major economy to regain cruising speed after the global slump, will lead economic recovery this year and reports of Beijing's action stoked fears that it may step too hard on the brakes.
Chinese banks extended 1.45 trillion yuan ($212 billion) in new loans during the first 19 days of the year as they scrambled to front-load lending before policy tightening shut the door on them, local media have reported.
Chinese officials, however, have made clear that they do not want to freeze lending, only to see banks lend more evenly to avoid the kind of surge that now seems to be occurring.
"Banks must reasonably control new lending, manage the pace well and try to achieve the even issuance and steady growth of loans quarter by quarter," Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), told a meeting, according to a notice on the agency's Web site.
To that end, regulators have ordered banks to call back some of the loans they extended in January, the official Securities Times reported.
Officials are targeting about 7.5 trillion yuan in new loans this year, down from a record 9.6 trillion yuan in 2009. However, that would still be the second-highest total ever and more than enough to power the economy to 9.5 percent growth this year, according to a Reuters poll.
But the lending curbs and steps by the central bank to mop up some of the vast pool of cash sloshing about the banking system have weighed on global investor sentiment, driving Chinese stocks to a three-month low and also hitting overseas markets.
Commercial banks that had made large amounts of loans this month were being instructed not only to halt new lending but also to recall already-issued loans as soon as possible, the Securities Times quoted an unnamed source as saying.
The report said the move means that the new loan total for January will fall well below market expectations, despite a burst of lending in the first three weeks of the year.
The newspaper did not provide details on how the loans would be withdrawn. It gave the example of an unidentified bank in Beijing that had lent 80 billion yuan this month, 60 billion yuan above its quota, and was now working to call back all of the excess funds.
The China Securities Journal, another official newspaper, said local governments had borrowed 3.8 trillion yuan last year, about 40 percent of all new loans in 2009, fueling worries that the loan explosion could leave a trail of bad debt in its wake.
The newspaper cited an unnamed source as saying that this wave of borrowing underscored warnings by central bank governor Zhou Xiaochuan about risks in the build-up of local government debt.
The central bank raised overall bank reserve requirements on Jan. 12, a move that went into effect on Jan. 18, and punished some especially carefree lenders by imposing a reserve surcharge on them, bankers said.
Many analysts expect the central bank to resume gradual tightening following the Lunar New Year holidays in mid-February, eventually leading to increases in benchmark interest rates.
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