China Insight - Banking & Finance

On May 28, 2010, the People's Bank of China (“PBOC”) and the China Banking Regulatory Commission (“CBRC”) jointly issued a circular, titled Opinions on Providing Financial Services to Further Support Energy Saving and Emission Reduction and Closing-down of Backward Production Capacities (the “Circular”). The Circular requires commercial banks to curb lending to enterprises which consume high amounts of energy, those with high emissions, and industries with backward production facilities and over-capacity problems. This move is in line with the PRC State Council’s efforts to enhance energy saving, reduce emissions and close down backward production facilities. However, it remains to be seen whether commercial banks will implement the Circular in a strict manner, especially when they face problems generating revenue due to the Government crackdown on the real estate property bubble in China, which in the past has contributed a large portion of banks’ revenue.

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