China's banks face loan caps

China’s major banks are about to exceed their annual loan quotas and may need to severely curb lending, Bloomberg reported. Four unidentified sources were quoted as saying that Industrial and Commercial Bank of China (ICBC; 601398.SH, 1398.HK), Bank of China (BoC; 601988.SH, 3988.HK), and Agricultural Bank of China (ABC; 601288.SH, 1288.HK) were nearing their annual limits for new lending and are now only extending new loans if existing loans are repaid. The banks are also reducing holdings of discounted bills in favor of longer-term debt. Regulators have set an official target of US$1.1 trillion for new lending for 2010, and have been monitoring banks’ balance sheets daily to ensure the quota is not exceeded. Curbing new lending has taken on a new urgency because the country’s inflation rate has been rising in recent months, reaching 4.4% year-on-year in October.