After last year’s government-directed lending binge, Chinese banks are reportedly tightening the reins on credit. According to press reports, the country’s four largest lenders doled out 300bn yuan (US$44bn) in new loans in February, down 30% on January’s total. Worries about a potential halt in lending as abrupt as last year’s surge sent shares in Shanghai lower today.

The official People’s Daily reports that, in total, the country’s banks probably approved around 600bn yuan in new loans last month, down from 1.4trn during the previous month. China’s central bank has recently raised reserve requirements and set a target for loan growth of around 7.5trn yuan this year, down from 9.6trn in 2009. But even after February’s slowdown, new loans in the first two months of 2010 account for around 25% of the central bank’s full-year target, suggesting that steeper cuts in credit may be on the horizon.

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