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China to slow lending, watch banks

China is trying to prevent speculative bubbles in real estate and other assets while keeping the economy on track. China is trying to prevent speculative bubbles in real estate and other assets while keeping the economy on track. (Aly Song/ Reuters)
Associated Press / January 21, 2010

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HONG KONG - China will slow its massive lending spree and step up monitoring of banks as it tries to prevent speculative bubbles in real estate and other assets while keeping the country’s economic recovery on track, a top regulator said yesterday.

China’s banking system is healthy despite last year’s explosive growth in credit, and regulators can manage the risks, said Liu Mingkang, the chairman of the Chinese Banking Regulatory Commission.

“We are confident that risks envisaged could be well absorbed,’’ Liu said at a financial forum in Hong Kong.

While China was also hit by the worldwide downturn, it has bounced back faster than economies elsewhere. Beijing hopes cooling the pace of lending will keep its economy growing without creating inflation and overheating.

Record bank lending in 2009 to support government spending on infrastructure and other projects under Beijing’s stimulus package has led to fears of asset bubbles and huge bank losses if too many loans sour.

After handing out some $1.39 trillion in loans last year, banks were expected to scale back lending to roughly $1.09 trillion in 2010, Liu said.