New standards for loans and finance

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clpstaff &clp articles

Two new regulations promise to standardise processes for project financing and lending for fixed assets, and help solve the problem of excessive loans flowing into China's stock markets

The China Banking Regulatory Commission (CBRC) issued the Guidelines for the Project Financing Business (项目融资业务指引) (Guidelines) on July 18 2009 and the Tentative Measures for the Administration of Loans for Fixed Assets (固定资产贷款管理暂行办法) (Measures) on July 23. The aim of the two new sets of regulations is to regulate fixed asset loans and ensure capital flow into the real economy.

To fight the recession, Chinese banks poured about Rmb7.37 trillion (US$1.08 trillion) of loans into the market in the first half of 2009. Without doubt, a large portion of these loans flew into the stock market and fuelled real estate bubbles. Many of these problematic loans were granted in the name of project finance and fixed asset loans.

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