China to relax limits on lending

China's central bank implemented an interest rate cut by 25 basis points, the first reduction since the end of 2008.

An official at the China Banking Regulatory Commission said that the agency is preparing to relax regulations on bank lending to local government financial vehicles and the property sector, two areas that the CBRC has repeatedly termed very "risky" since 2010.

"It is a natural decision for the CBRC, as 'stabilizing economic growth' has become the government's top priority," said the official.

China is continuing to loosen the regulatory reins on bank lending as the economy struggles amid rising global uncertainties, especially the European debt turbulence.

The CBRC will encourage banks to lend to rail and road projects and probably will accept a higher proportion of loans to such projects, according to a 21st Century Business Herald report on Wednesday.

Banks will also be allowed to lend more for low-cost and small apartments and resume lending to some qualified programs of local governments' financing vehicles, if earlier loans are repaid.

The proposed measures are awaiting final approval from the State Council, China's cabinet, the newspaper reported.

At the start of this year, CBRC Chairman Shang Fulin vowed to "firmly hold the bottom line of no systemic and regional risks", saying the regulator's task will be more difficult as the banking environment gets more complex.

The credit easing comes as growth in the world's second-largest economy slows, having declined to 8.1 percent in the first quarter, the weakest pace in nearly three years.

New yuan lending has repeatedly fallen short of expectations since the year started, and the economic data have dimmed.

These factors sparked concerns the government would step up pressure on banks to lend more to construction projects and the property sector.

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