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Beijing again targeting excess industrial capacity

  • Worries about the health of industries with massive overcapacity have many banks cutting lending to certain sectors by up to 20%, reports Reuters. At the same time, Beijing has asked banks to include loans linked to derivative products and debt financing along with regular reports of outstanding loans by sector.
  • The specific sectors facing audi are steel, cement, aluminum, smelting, flat-glass, and shipbuilding, says a bank source, and one area of particular concern is the common practice of bank loans backed by commodities like steel and copper.
  • The moves come in the wake of last week's landmark bond default by Chaori Solar as well as the default of a coal-related high-yield trust product, but is it the real deal? Stories of Beijing cracking down on industrial sectors with excess capacity have been floating around for a decade, but the train has kept on rolling (or bubble inflating, depending on your point of view). FXI -2.2%
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Comments (6)
  • Moon Kil Woong
    , contributor
    Comments (11015) | Send Message
     
    LOL, I'll take bank loans backed by commodities than what you have here: bank loans backed by nothing.
    13 Mar, 10:03 PM Reply Like
  • medzjohn
    , contributor
    Comments (221) | Send Message
     
    Same thing
    13 Mar, 11:24 PM Reply Like
  • jammerculture
    , contributor
    Comments (393) | Send Message
     
    Yes but you have bank loans backed by commodities denominated in a currency backed by bank loans backed by nothing.
    14 Mar, 12:27 AM Reply Like
  • june1234
    , contributor
    Comments (2499) | Send Message
     
    Issue is one of TBTF's exposure to China's financial system The GDPs of the US , Eurozone and China did not go belly up in 08, the over leveraged, underinsured TBTFs mortgage deals did taking everybody else around the globe down with them. Government for and by TBTFs
    14 Mar, 02:00 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1464) | Send Message
     
    This, together with the ban on mobile banking activities by Chinese internet companies, may reduce the risk of a credit crisis in the near-term. But, allowing the government to regain its almost complete control over China's banking system is a step in the wrong direction over the longer term.

     

    If banks subject to market discipline made loans to borrowers based on their economic, rather than political, merits, these strong actions by the government might not be required in the first place.

     

    Why is it that there never seems to be enough time, will, or resources to do something right the first time, but there is always enough time, will, and [other people's] resources to correct the inevitable problems that result?

     

    And, while Too Big To Fail and Too Big To Jail have become part of our vocabulary, Too Big To Bail has, so far, not become as popular.
    15 Mar, 08:20 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2797) | Send Message
     
    " banks subject to market discipline made loans to borrowers based on their economic, rather than political, merits"

     

    Don't the 2nd-tier banks lend on lending criteria?

     

    Let me think of their names other than their official names do not begin or end with "Bank of China".
    15 Mar, 12:20 PM Reply Like
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