China Easing Controls of Bank Investments
By ELAINE KURTENBACH
AP Business Writer
SHANGHAI, China (AP)--China is easing controls on investments and credit by its commercial banks in moves that could boost lending to private business and make banks more profitable.
A proposal is headed for the national legislature that would end a ban on banks investing in China's stock markets, the state-run Shanghai Securities News reported Friday.
Chinese banks hold more than 21.5 trillion yuan ($2.6 trillion) in deposits but have limited options in putting that money to work.
In another reform this week, the central bank said it was loosening controls on interest rates charged by commercial banks for loans. That could boost profits and increase lending to fast-growing private businesses.
``The banks have too much money in deposits and not enough investment options,'' said Wei Yen, who analyzes Chinese banks for the ratings agency Moody's Investors Service. ``This potentially allows them to charge enough on loans to ensure they have enough earnings.''
The draft banking legislation has high-level support in Beijing, said the Shanghai Securities News, one of China's largest financial dailies.
``If the government doesn't change the current situation, that the banks only use deposits for lending, the commercial banks will have a hard time reducing risks,'' the newspaper quoted Zhou Zhengqing, deputy director of the finance committee of China's legislature, as saying.
The decision to widen the range of interest rates banks can charge on commercial loans, announced on the Web site of the central People's Bank of China, would help banks to diversify lending away from state firms.
State banks have been reluctant to lend to private businesses, despite their surging growth, because lenders weren't allowed to charge rates high enough to reflect their risks.
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