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BEIJING - Two of China's biggest state-run banks have cut back lending to local government investment vehicles whose borrowing has raised concerns over a bad-loan crisis, a report said Friday.
The data reported by the Wall Street Journal appeared to indicate Beijing's efforts to tighten the reins on lending to avoid a glut of non-performing loans had kicked in.
Bank of China's outstanding loans to companies backed by local authorities fell to 419.7 billion yuan (61.7 billion US dollars) at the end of June, the newspaper said, citing Li Lihui, the bank's president.
That was down 4.6 billion yuan from December, compared with a 9.8 percent surge in the lender's total loans over the same period, the report said.
China Construction Bank Corp said earlier that its loans to local government entities had fallen to about 580 billion yuan at the end of June, down 11 percent since it last reported its exposure at the end of December, it added.
The news came after Chinese regulators warned in June that "risk management has been inadequate" in the banking sector and there were "growing potential risks" in lending to local government investment units.
It urged financial institutions to improve their "risk awareness".
Chinese banks lent huge amounts to provincial financing vehicles for construction projects last year after Beijing called for nationwide efforts to spur the economy.
Local governments are barred by law from borrowing directly from banks.
China has powered out of the global crisis on the back of a stimulus package worth four trillion yuan and the state-backed bank lending, which saw new loans nearly double from the previous year to 9.6 trillion yuan in 2009.
But state media said last month 23 percent of the 7.66 trillion yuan lent to these projects were in danger of turning sour, stoking concern that bad loans could threaten the world's third-largest economy.
The roughly 1.76 trillion yuan reportedly at risk of default would be nearly four times the amount of all non-performing loans in Chinese banks as of the end of June, according to official figures.
- AFP/ir
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