As reported by the country's official media, the banks of China provided less than 600 billion yuan in new February loans, an alarmingly low number that would help quell concerns of inflation.
The Asian economic powerhouse has steadily ramped up the required reserves for banks, requiring them to tighten lending in an effort to slow the growth of currency in country. Excessive money growth has contributed to the fastest inflation rates for China in over two years.
The China Securities Journal cited industry sources claiming that lending last month was below 600 billion yuan. The median projection was estimated to be 650 billion yuan, according to polled analysts at Reuters.
This marks the second consecutive month that financial lending has fell short of market expectations. Such data suggests that the government's campaign focused on credit growth is realizing some degree of success.
Diminished lending would display that higher requirements for bank reserves have resulted in a "better-than-expected effect", said the Chinese newspaper.
The country has increased the required reserves for lending twice this year. In addition, China has imposed on certain banks, those of which that have been particular liberal with lending, "punitive" increases on their reserve requirements.
Liu Mingkang, the head of the China Banking Regulatory Commission, said banks have been lending excessively fast over the past two years, posing a banking financial risk to the economy, according to a source from Reuters.
The top four financial institutions in China would put a limit on their combined new loans for the full year at 2.85 trillion yuan, said Chinese media this week. Because these Chinese banks typically make up almost 40 percent of overall lending, China could potentially see up to 7 trillion yuan in new loans this year.
To help manage the issue, many banks are implementing advanced financial analysis software tools. These platforms are designed to help lenders make better use of financial data in many aspects of a loan portfolio.
According to China Business News, quotas for the entire year were 880 billion yuan for Industrial and Commercial Bank of China, 750 billion yuan for China Construction Bank, 620 billion yuan for Agricultural Bank of China, and 600 billion yuan for Bank of China.
Banks and lending institutions in China have issued a combined 17.5 trillion yuan of new local currency loans in 2009 and 2010. That makes up almost 25% of the economy's total output during that time.
