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The central bank has raised reserve requirements in a bid to restrain lending, but to no great effect.
To tame inflation, the government has ordered state banks to restrain lending and to raise interest rates.
The latest developments there indicate that the efforts of policy makers in Beijing to restrain lending are beginning to pay off.
This helped restrain lending and inflation, but over the years it mostly affected small banks; large banks diversified their funding sources.
Its first use of these powers this week was tentative and more an insurance against a bigger bubble than a real attempt to restrain lending now.
The Bank should actively discriminate: to support necessary lending where the system is failing – for example, to small- and medium-sized business – and to restrain lending where it is not needed.
Similar(51)
Before the crisis hit, the government was trying hard to restrain runaway lending.
In 2006, they proposed rules to restrain such lending but backed off after banks objected.
If rates were raised high enough to restrain mortgage lending, they could also jeopardise the broader economy, especially since household and corporate debt together add up to as much as 200% of GDP.
Crain's Chicago Business reported last month that "... since 2013, bills have been introduced in Illinois, Indiana and 15 other states to ban or restrain lawsuit lending, or to enable it, according to trade groups representing one side or another.
But now, to moderate that growth, Beijing is trying to tighten credit by restraining bank lending and by raising interest rates.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com