(BEIJING) Agricultural Bank of China Ltd will halt all lending to property developers for the remainder of the month, three sources familiar with the decision told Reuters on Wednesday.

The move by AgBank, China’s third largest lender by asset value, underscores how the government is still curbing credit to the property sector, even as worries about a global double-dip intensify.

‘If other state banks follow suit, a new round of tighter property lending is very likely to materialise,’ said a bank official in Shenzhen, who declined to be named.

The property sub-index on the Shanghai Stock Exchange ended yesterday down 2.87 per cent, underperforming the 2.03 per cent decline by the benchmark Shanghai Composite Index.

AgBank would resume lending to developers in September, according to the sources who were informed of the decision.

They said management had decided on the halt to ensure the bank’s loan-to-deposit structure was properly balanced, adding that it had not been ordered by regulators.

But one branch official said AgBank would be cautious in lending to property developers for the rest of the year. ‘Credit will be for high-quality clients only,’ he said.

AgBank declined to comment. It was not known whether other banks would implement similar lending freezes.

China has waged a campaign to cool its real estate market since April, when soaring prices fuelled worries that a dangerous bubble was building. Policies from lending curbs to higher downpayments have slowed the pace of price rises, but analysts said they could take off again at any hint of relaxation.

The AgBank halt also shows how banks are bumping up against credit quotas imposed by regulators, a blunt tool used to control lending activity and money growth.

The government set a target of 7.5 trillion yuan (S$1.5 trillion) in new loans for 2010, down from the record surge of 9.6 trillion yuan last year.

With Chinese banks having already extended 5.16 trillion yuan in the first seven months, they will have to keep monthly new loans to about 500 billion yuan or less over the rest of the year if the target is to be met. — Reuters

Source: Business Times, 26 Aug 2010