Big story out there of a possible lending freeze. I first saw this in the Asia Wall Street Journal (also picked up by All Roads Lead to China). The meat of the story is in the first two paragraphs:
Chinese authorities are slamming the brakes on bank lending, in their latest attempt to curb the runaway investment threatening to overheat what is soon to be the world's third-largest economy.
In recent weeks, regulators have quietly ordered China's commercial banks to freeze lending through the end of the year, according to bankers in several cities. The bankers say that to comply, they are canceling loans and credit lines with businesses and individuals.
Seems like they've talked to government officials and lenders alike to get confirmation of this. However, this popped into my mailbox subsequently, from Bloomberg:
China's banking regulator today denied a report that it had ordered commercial banks to freeze lending through the end of the year.
"There's absolutely no lending freeze being imposed on Chinese banks,'' Lai Xiaomin, a Beijing-based spokesman for the China Banking Regulatory Commission, said in a phone interview today.
Hmmm. Obviously a blanket freeze would be an amazingly draconian policy that, one would assume, would only happen in a worst-case scenario. Those investment numbers that came out last week were certainly high, but slightly lower than expected, so I wouldn't think that we are in panic mode.
All of this does illustrate one well-known issue: China's policy tools with respect to the overall economy and the financial sector are far from effective at this point. That's what having a developing economy is all about, I suppose. Must be frustrating to be an economist at PBOC or CBRC, knowing what levers to pull, but then not seeing the movement in the economy that one would expect.