THE Central Government is cutting the size of outstanding bank loans to local government financing vehicles, Liu Mingkang, the head of the country s bank regulatory body, was quoted as saying yesterday.
Liu, chairman of China Banking Regulatory Commission (CBRC), was quoted by China Securities Journal as saying that Chinese banks are ordered not to extend any new loans to these vehicles unless they were for affordable housing development.
Liu said the full-year new loans in 2011 are expected to be 7.5 trillion yuan (US$1.14 trillion), based on a target of 16 percent growth in M2 money supply.
Chinese banks have extended a huge amount of loans, which some researchers have estimated at US$10 trillion yuan, to local government finance vehicles since China started its massive economic stimulus package in late 2008.
Economists fret that many of the projects they are funding will never be profitable, saddling banks with bad loans.
Liu said CBRC is also checking bank loans to property developers for risk control, but banks are still allowed to lend to property developers.(SD-Agencies)
