The interest rate floating range may widen and commercial banks
may be requested to optimize their lending structures during the
upcoming May Day holiday, said an official of the China Banking
Regulatory Commission Thursday.
“The upper limit of interest rates on lending to some overheated
industries, such as steel and real estate, would be set higher to
help lenders ward off risks,” said the CBRC official.
Finance industry officials said that the central bank is
considering removing the ceilings on bank lending rates while
maintaining controls on bottom rates to clamp down the excessive
lending that fuels rapid expansion in certain industries.
Domestic commercial banks have been allowed to set lending rates
70 percent higher than the guiding rates set by the People’s Bank
of China since the beginning of this year.
A wider band of lending rates would enable commercial banks to
lend according to their risk assessment. Borrowers from the
overheating industries would be likely to face higher charges from
banks.
China, which posted 9.7 percent economic growth in the first
quarter of this year, this week ordered companies in the aluminum,
cement and real estate industries to provide a minimum 35 percent
of the investment in any new projects, compared with the previous
requirement of 20 percent.
The CBRC official said the new rule would require commercial
lenders to adjust their lending structures.
“Most of the new loans in the previous months of this year were
medium-and long-term loans, which are too risky for lenders,” said
the official.
Lenders in Shanghai extended loans worth 79.0 billion yuan
(US$9.5 billion) in the first three months of this year, 49.9
billion yuan of which was in loans amortized for more than five
years.
The CBRC official also confirmed yesterday that all joint-stock
commercial lenders on the mainland had temporarily stopped
approving new medium- and long-term loans before May 1.
(Shanghai Daily April 30, 2004)??