Regulator orders banks to report on loans to polluting industries
The banking regulator has ordered mainland lenders to inspect loans to industries plagued by overcapacity or pollution problems and report back by the end of this month.
The China Banking Regulatory Commission has also asked commercial banks to withdraw loan-granting authority from branches and sub-branches.
Headquarters must approve credit for expansion projects in industries with overcapacity or that are polluting, the watchdog said in a media briefing yesterday.
The inspections are being conducted to make sure loans support Beijing's efforts to change the economic development model from heavy reliance on polluting industries to more environmentally friendly sectors.
Industrial and Commercial Bank of China, the world's largest lender by market value, extended 455.4 billion yuan (HK$518.1 billion) in new loans in the first five months and all of these loans financed projects that met the environment requirements, ICBC credit department deputy general manager Wei Xuekun said.
Wei said the bank made no new loans to the sectors targeted by the central government for lending curbs in the second half of last year.
Xia Weichun, an officer from Fujian-based Industrial Bank, said the lender had differentiated itself by focusing on support for energy conservation and emission-reduction projects.
The bank also incorporated 'social risk management' into assessments of projects before advancing loans.
Jing Ulrich, chairman of JPMorgan's China equities and commodities, said policy support for inefficient, old-economy industries, especially midstream materials producers, was waning as a result of the restrictions on bank lending.
'Having relied heavily on government-sponsored infrastructure investment to stimulate an economic recovery in 2009, Chinese policymakers are again focused on the long-standing goal of increasing the contribution of consumption to growth,' Ulrich said.
Mainland economic data has shown a clear deceleration in fixed asset investment, from 31 per cent last year to 26 per cent in May.
'Through a host of measures, including tax cuts, direct subsidies, minimum wage hikes, expanded social security provisions and the promotion of new economy industries, authorities aim to improve consumer confidence and augment disposable income,' she said.
