After domestic commercial banks’ rash of new loans earlier this year led to orders to halt lending for part of January, they have begun February more conservatively. Industrial and Commercial Bank of China (1398.HK, 601398.SH) said on Monday that it would change its lending practices to support "environmentally friendly economic growth," and would restrict loans to enterprises without proper licenses. Now, China Construction Bank (0939.HK, 601939.SH) is said to have set its annual loan quota at about 20% below last year’s, and is introducing quarterly lending limits.
Officials in Beijing say that banks, as commercial enterprises, are not directly ordered by the government; however, in this case, it’s clear that the government’s displeasure over the high rate of loan growth in January inspired some strong suggestions from above regarding new loans.
Beijing will not look kindly on too-easy lending in the coming months, particularly as wage increases – Jiangsu’s government has increased the monthly minimum wage in that province by 13% – feed concerns about possible inflation. But talk of lower loan growth must be seen in the context of what still remains a loose monetary environment. China’s loan target of US$1.1 trillion for this year means money will not be hard to come by. Banks may be temporarily chastened, but lending will remain strong over the course of the year.