China's central bank has capped 2008 quotas for new lending by the Big Four state banks as part of its campaign to curb credit growth and keep the economy on an even keel, a banking source said yesterday. If the guidelines are enforced, the growth rate of loan creation by the major commercial banks would decelerate, but they would still have ample room for lending and profitability growth.
The Big Four banks account for nearly half of China's outstanding loans, according to government statistics.
The Industrial and Commercial Bank of China (1398), China Construction Bank (0939) and Agricultural Bank of China were told to keep new loans in 2008 within this year's targets, which were 365 billion yuan (HK$386.5 billion), 350 billion yuan and 310 billion yuan, respectively, the source at one of the banks said.
The 2008 new lending quota for Bank of China (3988) was trimmed to 260 billion yuan from 280 billion yuan this year, the source said.
"Lending will be strictly controlled, and next year all of our bank branches will have to submit monthly reports detailing the amount of loans they have put into circulation," the source said.
China has in recent months stepped up its year-end clampdown on credit growth, freezing new lending by banks, in a bid to rein in investment and bring rising inflation under control.
Such curbs are typically relaxed in the first months of the new year, allowing lending to shoot up again, but officials have suggested there will be little let-up in 2008.
Analysts have said stricter limits on new lending, coupled with a slight slowdown in the pace of China's growth, could reduce profit growth at the country's major banks to between 30 percent and 50 percent after an estimated 70 percent growth rate this year.
Overall, China will limit next year's commercial bank loan growth to 15 percent and has vowed to punish lenders that exceed quarterly limits, the official Shanghai Securities News reported last week. Those that lend too much could be ordered to buy central bank bills at below- market interest rates or to set aside a greater share of deposits at the central bank as reserves, the paper said.
