China bank lending falls sharply

BBC News: Click Here

According to BBC News, Lending by Chinese banks fell sharply in the first three months of the year after the government’s efforts to clamp down on new loans proved successful.

China has been suffering from unstable price control, and recently its inflation went up to about 3%. Controlling inflation is one of the key roles of Chinese government in order to maintain stable economy and acquiesce people’s complaints.

As you see, China’s inflation is pretty high right now. Chinese bankers knew that it was from excessive flow of yuan in their economy. So they simply reduced lending, and it effectively controlled the inflation getting out of control.

The article further on discussed about China’s recent trade deficit. The article analyzed that this deficit resulted from rise in volumes and prices of raw materials. However, ironically, China has hit $2.5 trillion of foreign exchange reserves. This is approximately 1/5 of  US GDP, which implies that Chinese economy is amusingly doing fine despite the recent trade deficit.

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