China tells banks to curb lending -sources

BEIJING, Nov 19 (Reuters) China has ordered banks to limit their lending through the end of the year as part of efforts to keep investment under control and prevent the world's fourth-largest economy from overheating, sources said on Monday.

Authorities routinely clamp down on bank lending in the final quarter of the year, but banking sources say they have stepped up those efforts this year.

Banking and official sources told Reuters that the central bank and banking regulator had been pressing lenders to keep their credit for all of 2007 within the guidelines set at the start of the year, forcing some of them to sharply curb lending in the final months.

However, the sources said the so-called ''window guidance'' did not amount to a freeze on net new lending.

The Wall Street Journal on Monday cited banking and regulatory sources as saying that banks were being required to ensure that their outstanding loans at the end of the year do not exceed the loan levels as of Oct. 31.

An official at the China Banking Regulatory Commission (CBRC) denied that the agency had laid out such a specific target.

''No, no. We only require the banks to control lending reasonably,'' Lai Xiaomin, a spokesman for the CBRC, said of the newspaper's report. ''We have not set fixed quotas for them.'' A source at one major lender said that authorities' demands to rein in lending would not have much of an impact on its operations during the rest of the year, as it had not exceeded the guidelines set out for it at the start of the year.

''Such restrictions are mostly targeting smaller banks, and they only require them to control their lending so that annual growth does not exceed 13 percent,'' a separate source said.

Banks issued just 136.1 billion yuan (.3 billion) in new domestic-currency loans in October, a sharp slowdown from 283.5 billion yuan in September and 302.9 billion yuan in August.

But in the first 10 months of the year, banks extended 3.5 trillion yuan in new loans, compared with 3.18 trillion yuan in all of last year.

REUTERS BJR SSC1132