China to Cap 2008 Lending at 3.6 Trillion Yuan

China's central bank has set a target of capping new domestic-currency lending in 2008 at last year's level of 3.63 trillion yuan (US$500 billion), state media reported on Tuesday.

The official China Securities Journal quoted sources familiar with the situation as saying that the central bank would review banks' lending on a quarter-by-quarter basis to ensure they spread credit out over the year.

The People's Bank of China (PBOC) has ordered banks to limit their lending in the past few months, resulting in a drop in new yuan loans in December to 48.5 billion yuan, compared with 87.4 billion yuan in November and 136.1 billion yuan in October.

The PBOC would take steps to ensure that a rebound did not occur in the first months of the new year, as had often happened in the past, the newspaper said.

"Those banks that exceed their quotas will face strict 'window guidance', including punitive central bank bills," it said.

Domestic media reported earlier that the government would limit loan growth to about 15 percent this year, but had not put a figure on new lending. The central bank itself has not disclosed targets for lending or money supply growth.

The aim of limiting new lending to last year's level could come as a relief to some market participants, as many had been expecting even tighter quotas for this year.