China Freezes Lending to Curb Investing Frenzy
November 21st, 2007Translation: China wants fewer U.S. Dollars.
These lending restrictions will raise the value of the yuan, raising the prices of the crap at Walmart, lowering demand, stemming the flow of dollars to China.
That’s my best guess, anyway, as to the implications of this.
Via: Wall Street Journal:
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.
A China Banking Regulatory Commission official here confirmed that local and Chinese subsidiaries of foreign banks have been asked to ensure that loans at the end of the year don’t exceed the total outstanding on Oct. 31. The official described the request as “guidance aimed at supporting the macro-control measures being implemented.”
Over the past few years, Chinese authorities have repeatedly sought to rein in investment in sectors such as property development, where they deemed it was becoming excessive. But even in China a blanket edict to halt lending growth is unusual.
…
By raising rates further China could risk boosting the value of its currency, the yuan, too much for the comfort of its exporters, a critical part of the Chinese economy. A stronger yuan would make Chinese exports less competitive in world markets.
Research Credit: Skyline
