RateAPY

Chinese Banks to Rein In Lending

Posted by: RateAPY Bank Rates News
January 20th, 2010

The U.S. economy is still struggling to right itself after the recent recession. But in China, growth is healthy due to extreme government stimulus measures. Economists are warning that China may have overstimulated its economy by keeping its key interest rate too low for too long. Economists in the U.S. are also worried about this issue.

Last week, China raised its key interest rate in an attempt to slow lending. According to the numbers, banks made more new loans in January than ever before. If left unchecked, there would be a 50% increase in lending year over year. Today, banking in China was reined in further. Banks are now required to increase reserves and lend less of their deposits.

Money on deposit at banks, often in the form of a money market account, savings account, or certificate of deposit, is in turn loaned to consumers.