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China Ordered "Clear Backing" for Local Lending Vehicles to Sustain New Stimulus Packages

07-31 15:20 Caijing
Chinese banking regulator has ordered banks to scale up lending to local governments via local financing vehicles, at a time when local government kick started a slew of new stimulus packages

Chinese banking regulator has ordered banks to scale up lending to local governments via local financing vehicles, at a time when local governments kick started a slew of new stimulus packages to spur a slowing economy.

Local branches of some commercial banks have already been asked to "give credit support" to financing vehicles in provinces and major counties, according to China Securities Journal.

The official newspaper also cited unnamed sources as saying that the new loans would largely go to projects in areas such as railways, natural gas and clean energy.

Chairman of China Banking Regulatory Commission Shang Fulin told a conference in late June the CBRC would support the real economy in a more "efficient" way, including ratcheting up efforts to bolster the construction of major national projects.

In the mean time, some local governments have come up with huge stimulus packages recently to sustain growth, a size that could match the spending binge during the financial crisis in total.

On July 16, Ningbo, a city in the eastern Zhejiang Province, announced 26 new measures to prop up growth, including tax breaks, investment expansion, and technological innovation.

On July 23, Nanjing, capital city of Jiangsu in east China, introduced new measures to expand consumption, covering areas in investment, property, culture, entertainment, and others.

Also on July 23, local government of Guizhou Province said it was ready to formalize a package of development programs, which was worth 3 trillion yuan, and release it in August.

On July 25, Changsha of Hunan Province announced that the government would invest up to 729 billion yuan in 195 major projects in 2012, to "revive potential market demand".

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