Last week I wrote an article on this site about lending by Chinese banks. The forecast was correct. According to the Wall Street Journal (http://online.wsj.com/article/SB124025046322435795.html) Chinese authorities are concerned that some of the lending will be wasted.
“[The head of China's banking regulator, Liu Mingkang] said he is concerned banks aren't properly checking borrowers, are lending too much to a few favored clients, and are doing too much short-term lending.
The government's concerns derive from the size and unusual structure of bank lending in China so far this year. In the first three months of 2009, China's banks extended 4.58 trillion yuan ($640 billion) in new loans -- nearly as much as all new lending for 2008 and equivalent to around 70% of the nation's gross domestic product for the quarter.
An unusually large proportion of the new loans -- 1.48 trillion yuan, or about a third -- was in the form of short-term bill financing, usually used for businesses that need working capital quickly. Many analysts say there is evidence companies have been borrowing those short-term funds only to put them back on deposit and earn the interest. Some of the credit also has flowed into the stock and property markets, they say.”