In an extremely dangerous move, the Chinese central government has put a halt to a great deal of the bank lending in the country. According to The Wall Street Journal "a China Banking Regulatory Commission official in Shanghai confirmed that local and Chinese subsidiaries of foreign banks have been requested to ensure that loans outstanding at year end don’t exceed the levels on Oct. 31"
The move could hurt consumer spending within the country, but its most immediate effect should be to bring local stock markets down. Much of the stock purchasing that has lifted shares traded in Shanghai to tremendous levels comes from the ability of buyers to borrow money to put into shares of Chinese companies.
Overall, it is not good news for investors in China shares.
Douglas A. McIntyre
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