In recent weeks, regulators have quietly ordered China's commercial banks toread here
freeze lending through the end of the year, according to bankers in several
cities. The bankers say that to comply, they are canceling loans and credit
lines with businesses and individuals.
If this is true then all I can say is that the Chinese government is trying to crash their stock market and thus bring about a global stock market crash since China is the engine that is fueling global growth.
Lets break this Chinese edict. In essence the Chinese authorities are telling banks to stop lending . Businesses requiring lines of credit and capital injections via bank loans are going to be left out in the cold. A credit freeze is going to rein in household spending and thus hurt business profits. Even though this lending freeze is temporary, the effects could be long lasting.
"If loan growth were to stop, that would seriously disrupt investment plans and would introduce a high degree of uncertainty regarding financing," says Stephen Green, an economist at Standard Chartered Bank in Shanghai.
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