China's banking regulator has warned against excessive credit and called on banks to tighten controls and pay more attention to regulations.

 

"Excessive liquidity and production overcapacity in some sectors still plagues the economy, banks must be cautious in making loans," said Liu Mingkang Chairman of the China Banking Regulatory Commission at a recent televised financial conference.

 

Official data shows that Chinese banks have provided 10.9 trillion yuan (US$1.3 trillion) in medium and long-term loans by the end of September, up 21.4 percent year-on-year.

 

Along with rapidly expanding bank loans is the growth in fixed asset investment which hit 7.19 trillion yuan by the end of September, up 27.3 percent year-on-year.

 

Surging loans have made it difficult for banks to optimize their loan structure and prevent credit risks, Liu noted.

 

He urged banks to take effective measures to prevent a rebound of non-performing loans. "The top priority of local banks is profit not market share," he said.

 

Liu warned that credit risks have also been on the increase due to neglect by bank employees, saying that some commercial banks skirt regulations and don't perform proper credit evaluations. "Fake mortgage loans were often reported," he added.

 

Liu called on banks to stay alert against illegal and risky loans and pay special attention to credit fraud.

 

(Xinhua News Agency October 26, 2006)