Embryonic tightening

20 January 2010 By Wei Gu

The banking regulator seems to have ordered some lenders to apply the brakes. But the actual tightening effect is limited. The overall loan quota for 2010 remains unchanged. That may explain the relatively sanguine market response.

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Chinese banking authorities have instructed some major banks to curb their lending over the rest of this month, official media and banking sources said, sending the Shanghai index down almost 3 percent.

The central bank told some lenders, including Citic Bank and Everbright Bank, to increase their reserve requirement ratio by half a percentage point for three months, banking sources told Reuters.

Chinese banks lent 1.1 trillion yuan ($161 billion) in the first half of January, according to Reuters. Earlier in January, China's central bank raised bank reserve requirements for the first time since June 2008.

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