China may roll out some new lending rules during the coming Labor Day holiday to cool down its investment and trade-driven economy which tends to be overheating.

The imminent announcement may include a widened interest rate floating range and a request for commercial banks to optimize their lending structures, said an official of the China Banking Regulatory Commission Thursday.

"The upper limit of interest rates on lending to some overheated industries, such as steel and real estate, would be set higher to help lenders ward off risks," said the CBRC official.

Industry officials said that the central bank is considering removing the ceilings on bank lending rates while maintaining controls on bottom rates to clamp down excessive lending that fuels rapid expansion in certain industries.

Domestic commercial banks have been allowed to set lending rates 70 percent higher than the guiding rates set by the People's Bank of China since the beginning of this year.

A wider band of lending rates would enable commercial banks to lend according to their risk assessment. Borrowers from the overheating industries would be likely to face higher charges from banks.

China, which posted 9.7 percent economic growth in the first quarter of this year, this week ordered companies in the aluminum, cement and real estate industries to provide a minimum 35 percent of the investment in any new projects, compared with the previous requirement of 20 percent.

The CBRC official said the new rule will require commercial lenders to adjust their lending structures.

"Most of the new lending in the previous months of this year were middle-and long-term loans, which is too risky for lenders," said the official.

Lenders in Shanghai extended loans worth 79.02 billion yuan (US$9.52 billion) in the first three months of this year, of which loans worth 49.9 billion yuan were for more than five years.

The CBRC official also confirmed Thursday that all joint-stock commercial lenders in China's mainland have temporarily stopped the approval of new middle and long-term loans before May 1.

(eastday.com April 30, 2004)