SHANGHAI / BEIJING (Reuters) – Chinese regulators are urging banks to cut their loan books this year to protect against emerging risks from bubbles in domestic financial markets, people familiar with the matter said Friday.
The banks, including foreign and state lenders, have received instructions from the central bank in the past few days telling them to limit the total amount of their loan this year, three bankers said on condition of anonymity.
The China Banking and Insurance Regulatory Commission (CBIRC) is also “seriously” looking into the misuse of business loans for individual lenders for personal investments, two of them said, which is contrary to Chinese rules. .
“There was a lot of money in the name of business loans going into the property and stock markets during last year’s pandemic,” said one of the bankers.
“Banks are scrambling to collect last year’s loans and will not extend such loans. ”
CBIRC and the People’s Bank of China, China’s central bank, did not immediately respond to requests for comment.
China contributed significantly to credit support for the economy in 2020 as the COVID-19 pandemic hit, but some individuals spent the money buying property and stocks, igniting bubbles in the markets , the sources said.
Business loans must be used on operating expenses such as rent and purchase of equipment. The banking watchdog bans borrowers from using such loans on stocks and property purchases.
Loans to small and medium-sized businesses with large commercial banks rose 50% last year and it aims to expand by 30% later this year, according to a government report released on Friday. China has also called for banks to increase lending and lower interest rates for small businesses in 2020.
CBIRC chief Guo Shuqing said on Tuesday that he was “deeply concerned” about the risks of bubbles bursting in foreign markets and raised bubble risks as a key issue facing China’s property sector.
China’s CSI300 blue-to-blue index so far has lost more than 1% in March.
Reporting with Winni Zhou and Zhang Yan in Shanghai, and Rong Ma and Ryan Woo in Beijing; Edited by Ana Nicolaci da Costa