China may cut lending by up to 10 percent this year and is also studying punitive measures to penalize lenders which lend excessively, the China Securities Journal reported yesterday, citing unidentified banking sources.
The newspaper quoted a bank official as saying that the lending this year is estimated to range from 7.2 trillion yuan (US$1.1 trillion) to 7.5 trillion yuan.
Controlling lending is one measure to fight inflation and is an option on top of the central bank's latest move to raise bank reserve requirement ratio for the seventh time since 2010 to a record 19.5 percent for China's biggest banks.
"The hike in reserve ratio is not enough to curb inflation," said Chen Wei, an analyst at Minzu Securities Co. "To strictly control the lending quota is essential and it is better to damp borrowing demand by another interest rate rise."
Lenders tend to lend aggressively in January before measures are unveiled to rein in lending. Chinese banks, led by the four biggest state-owned lenders, may have already lent close to 800 billion yuan in the first two weeks of January, the newspaper said.
The China Banking Regulatory Commission has suggested bank loans in January should not exceed 12 percent of annual lending quota, or 900 billion yuan in this case. Banks that lend excessively will either face a higher reserve requirement ratio, told to buy central bank bills or receive other forms of punishment, according to the newspaper.
The first month is usually the prime time for lending and can account for as much as 17 percent of annual bank loans.
China's new yuan lending hit 7.95 trillion yuan (US$1.2 trillion) in 2010, beating the 7.5 trillion yuan target set at the start of the year.
Abundant capital flows in the market have pushed up consumer prices. The Consumer Price Index rose 5.1 percent in November, the most in 28 months.
