The China Banking Regulatory Commission (CBRC) released a draft of new rules designed to limit the misuse of funds lent by banks as part of Beijing’s US$586 billion stimulus package, the Wall Street Journal reported. The rules, which have been released for public comment, are a reflection of concerns that high levels of bank lending may result in the mis-direction of funds away from projects intended to boost the economy. China’s banks lent out US$670.9 billion in the first quarter of the year, 91.6% of the target for the entire year. The rules will require lenders to calculate the risk of fixed-asset investment loans and stipulate that agreements must be clear. Furthermore, to ensure that the loan is spent on the project it is requested for any loan exceeding 5% of a project’s investment or that is over RMB5 million (US$732,620) must be paid to the parties contracted to complete the work, rather than the borrower.
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