Sunday, February 21, 2010

Hayek's warning...

...coming to fruition once again.

On Sunday February 21, 2010, 5:04 am EST

BEIJING (AP) -- Banking regulators in China have ordered institutions
to tighten controls on risk and carefully scrutinize borrowers'
ability to pay their debts in a new step to rein in lending.

The government's order comes as Beijing tries to prevent excessive
lending that it says could lead to financial problems while ensuring
adequate credit to keep the economic recovery on track.

Chinese leaders worry that a stimulus-driven torrent of lending is
fueling a dangerous bubble in stock and real estate prices. Beijing
has ordered banks to set aside additional reserves and to keep lending
stable, but the central bank has avoided raising interest rates, which
might slow down growth.

The China Banking Regulatory Commission, or CBRC, said in a statement
on its Web site Saturday that it issued two regulations to increase
risk management on personal and working capital loans. The rules took
effect Feb. 12.

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