Chinese banks may curtail their rabid lending in a bid to slow the formation of asset bubbles in the country, reports say.
The state-run Xinhua news agency indicated on Wednesday that the People’s Bank of China – the central bank – called on financial institutions to limit loan swings and manage the pace of the loans they issue.
The Bank of China suggested that it would do just that; in a statement emailed to Dow Jones Newswires, the bank said that it would “ensure a proper amount and pace of lending and maintain the sustainability of lending.”
The Chinese government has indicated in recent weeks that it will consider how best to prevent bubbles in stocks and real estate. Its $586 billion stimulus led to rapid price appreciation in those markets; in addition, the easy provision of credit has sparked fears that there is too much froth in the country’s economy.
The government has also used its massive cash reserves to buy U.S. Treasury securities, and those purchases are unlikely to be dialed back any time soon, especially if China is seeking increased stability. According to the Treasury, foreign purchases of long-term securities totaled $114.5 billion in December, up from $6.9 billion the month before.
By Benjamin Foster
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