Loan Curbs on Sectors with Overcapacity
Since last September, the Chinese government has identified steel, concrete,
and plane glass industries as sectors with excessive output and decided to halt
approval of new projects in these sectors. On December 22, the government took a
further step by banning companies and investment projects in the sectors from
issuing corporate bonds, shares or other means to raise capital.
In a guideline issued jointly by the central bank, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission, commercial banks and financial institutions are prohibited from providing any credit to projects which violate industrial policy.
Lending to high energy consuming, high-polluting industries will be banned in order to adjust industrial structure, according to a statement posted the Web site of the People's Bank of China.
Meanwhile, the government tried to foster new growth sectors through opening up capital raising channels. In the guideline, alternative energy, alternative fuel vehicles, green technology, new materials, pharmaceuticals, and information technology are targeted as industries that banks will support with easy credit.
Companies in new growth sectors are encouraged to use loans in mergers and acquisitions; insurance companies are called on to provide support for export and overseas investment. Cross-border yuan settlement will be expanded to more cities from the current five cities -- Shanghai, Zhuhai, Guangzhou, Shenzhen and Dongguan, to buffer more companies from foreign exchange rate fluctuations.
More innovative capital-raising methods will be allowed in textiles, equipment manufacturing and shipping industries that the government is to trying to develop.
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