Shanghai banks ordered to rein in lending

Banks in Shanghai have been ordered to halt loans tied to fixed-asset investment – which generally involves the construction and property industries – for the rest of the year, the Wall Street Journal reported. The move is unlikely to have a significant economic impact but it reflects the government’s struggle to rein in liquidity and prevent the economy from overheating. Shanghai’s banks issued US$5.4 billion in new loans in November, more than seven times the figure from a year ago. Nationally, new loans were less than double those of last year. According to people familiar with the situation, banks in the city have also been banned from rolling over loans that mature during the remainder of 2010. The clampdown is likely tied to the difficulties China faces staying within its annual lending quota. At the end of November, banks were already on the cusp of the US$1.13 trillion full-year target.