The China Banking Regulatory Commission (CBRC) on February 8
announced a probe into bank loans in fast-growing sectors like
steel and cement in the latest move to prevent the nation's economy
from overheating.
The move followed a conference by the State Council, or cabinet,
earlier this month, which, analysts say, responded directly for the
first time to a months-old debate among economists if excessive
investment exists in some industries.
The conference decided to harness the excessive investments in
the three sectors of steel, aluminum and cement, where the
government believes a recent capacity expansion has far outstripped
demand, and low efficiency and serious pollution have become
protrusive problems.
The purpose of the CBRC probe, the commission said on February
8, is to get a better picture of bank loans flowing into the steel,
aluminum, cement, real estate and automobile sectors and see if
banks have done their jobs in delivering funding support to
agriculture, credit consumption as well as small- and medium-sized
enterprises.
All State-owned commercial banks, joint-stock banks and
county-level rural credit cooperatives are required to submit
self-appraisal reports to the CBRC by the end of February. The
commission will hold its own inspections into financial
institutions in March and April, it said.
Signs of overheating raised concerns among many economists and
government officials as early as the first half of last year, while
others feared constrictive measures would backfire by derailing the
rapid economic growth that is key to generating new jobs for
workers laid off from the State sector.
China's economy grew by 9.1 percent last year despite the SARS
(severe acute respiratory syndrome) outbreak, the fastest pace
since 1997 when the Asian financial crisis struck.
In a report to the State Council at the end of last year, the
State Development and Reform Commission (SDRC) proposed measures to
prevent further investment excesses in steel, cement and aluminum,
sources said.
The rapid capacity expansion in recent years, with thousands of
new plants mushrooming mostly in the northern and eastern parts of
the country, has distorted industrial structures, the report
said.
But the expansion has benefited manufacturers in those sectors,
although analysts say the robust growth in profits is hardly
sustainable.
Profits at the nation's 39 major metallurgical firms jumped by
93 percent last year on a year-on-year basis, official statistics
indicated last week.
Sources said the State Council would soon send investigators to
key regions to ensure that corrective measures are implemented. The
investigators are mainly from the SDRC, land resources and
environmental authorities as well as the ,
the central bank.
The environmental and land resources authorities are reportedly
drafting stricter rules on approving new steel, aluminum and cement
projects.
In the middle of last year, the central bank made the nation's
first governmental effort to prevent economic overheating, imposing
stricter lending rules on real estate to prevent excessive
investment.
A few months later, it announced its first hike in bank reserve
requirements in recent years in an effort to slow down rapid
monetary growth, a move that prompted worries that this measure
would undermine the momentum of the nation's economic growth.
Before the government moved, commercial banks had already
revised their lending policies in an effort to steer clear of the
investment bubble. Among them, the Minsheng
Banking Corporation issued stricter rules on lending to steel
firms at the end of last year after its quantitative analysis on
the sector detected signs of overheating.
(China Daily February 9, 2004)