No more loans till 2011!

There are rumours that China’s 4 largest state banks will not be issuing any new loans to property developers for the last month and a half of 2010.

I’ve also heard that they have not actually approved any new loans since the end of October as they had already met their allotted annual targets.

The 4 banks involved are:

Industrial and Commercial Bank of China
China Construction Bank
Bank of China
Agricultural Bank of China

The authorities are walking a tight rope.  As I’ve written before, when central banks wage a war their decisions tend to fall into two phases. First comes a long line of decisions that have no impact (in the case of Chinese real estate this cycle we have a line of RRR increases, and loan curbs… yet prices are still heading North), and then come one or two decisions with a major impact (most often disastrous) with a more pronounced outcome than intended. It’s like a dam breaking: gradual or slight change is almost impossible. When it comes to reigning in Chinese real estate, we are still in phase 1 – but gird yourself… you don’t want to be caught holding the hot potato!

Zai Jian

Lending targets curtailed

Just 3 days ago (26 July) we discussed expectations for pinpointed measures to prevent over lending.

Two of China’s largest banks have set limits of 2009 lending:

1.Industrial and Commercial Bank of China- ICBC (SEHK: 1398) plans to issue new loans of CNY1 trillion over 2009 – to date the bank is 83% towards that target.

2. China Construction Bank – CCB (SEHK: 0939) has set a CNY900bn limit, and is already 79% of the way there.

I see these as sensible measures towards helping sure up the quality of the banks’ loan books.  From a maco perspective it is one more incremental step towards preventing an asset bubble.