Chinese Banks To Stop Loaning to U.S. Banks? (Updated)

The South China Morning Post is reporting that the China Banking Regulatory Commission has instructed Chinese banks to stop loaning money to U.S. banks.

Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

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 CBRC wouldn’t comment, so I can’t guarantee that this is genuine news. However, I can’t imagine that even the rumor of this happening would do too many good things for the financial markets.

UPDATE (Dave Schuler)

Alex beat me to the punch with this story. As I’ve mentioned before the SCMP is generally favorable to Beijing and, presumably, well-connected. My first reaction on reading this story was that it was a trial balloon.

FILED UNDER: Economics and Business, ,
Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.

Comments

  1. anjin-san says:

    Perhaps McCain will rush to Beijing to deal with the situation…

  2. Michael says:

    They probably just need to money to bailout China’s dairy industry.

  3. Bystander says:

    They probably just need to money to bailout China’s dairy industry.

    LOL – what a great comment!

  4. Web Smith says:

    Something’s fishy here. As American banks squeeze credit and manipulate the stock market to make our industries suffer, the Chinese join in even though they have over $1 trillion in Freddie and Fannie.

    It makes you wonder which economic terrorist on Wall Street or from the halls of the Fed made the call to get them to help take over our treasury. Don’t worry about the $1 trillion. Once we get our hands on the Treasury, we’ll pay you back.

    Time to start printing Treasury notes and use the interest to pay off the national debt. Let the Fed keep their notes.

    http://ewebsmith.com/finance/RonPaulAnswers.html

  5. How much of an effect this would have likely depends on how fungible debt is.

    Presumably Chinese banks will still need to do something with the money and will lend it to someone other country besides the US. That will drive down the interest rates in those countries, leading other people moving money from there to the US in search of a better rate.

  6. Steve Verdon says:

    You know it is at moments like this that I think the Chinese (leadership) are just plain old vanilla stupid at times. Seriously, they think that their economy would be spared if a massive world wide credit crunch ensues? That they can just blast off into outerspace and be their own world? What?