Mainland banking regulators may soon crack down on so-called 'discounted bills' issued by banks over concern that the money may actually be used for speculative purposes.
About 20 per cent of the 1.48 trillion yuan (HK$1.68 trillion) in discounted bills granted by banks did not flow into the real economy in the first quarter, state media quoted official sources as saying.
The China Banking Regulatory Commission has increased scrutiny of the special form of financing and will soon ban it when it is not related to trade after finding irregularities during its probe of swelling loans, the Shanghai Securities News reported yesterday.
New loans extended by mainland banks totalled 4.58 trillion yuan in the first quarter, up 25 per cent on the year after the central bank loosened monetary policy to stimulate the economy.
About 32 per cent of the loans were discounted bills, central bank figures show.
In 'discounting' a bill, a bank takes ownership of a company's bill to a buyer before it is due and credits the value of the bill, after a discount charge, to the company's account. The bank then collects on the bill.
The reported 20 per cent of discounted bills that are not flowing into the real economy suggests that about 300 billion yuan has been channelled into stocks and other assets or used for arbitrage of speculative purposes. Beijing is concerned because it wants loans to go to the real economy to combat the economic slowdown.
