China Denies US Lending Ban

by Jordan Yerman | September 26, 2008 at 05:35 am

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China is denying a media report that it has ordered domestic banks to stop lending to US financial institutions as the mortgage-crisis-driven market spiral continues to spread around the world.

The China Banking Regulatory Commission moved to quash a South China Morning Post report Thursday that said Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions. "The CBRC has never, through any channel, released a statement or ordered domestic commercial banks not to lend to or borrow from U.S. financial institutions," the regulator said in a statement on its Web site.

I read the article below before reading the one above, and thought, "This it also may be more of a PR move to deflect from current scrutiny of what's going on with the milk".

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.

China's economic advantage is at a higher level: they own the bulk of US debt, and so would not need to take such a blocking action. I'm no financial expert, but I'd guess that this puts China in the position of advantage. (I am, of course, open to correction)