Reports of lending cuts in China prompt rise in risk aversion

07/30/2009 | Financial Times (tiered subscription model)

The two largest state-owned banks in China reportedly plan to cut back on new loans during the last six months of this year. The news prompted risk aversion to increase, with the brunt of sales being felt by commodities and emerging-market assets. In the first half of the year, Chinese banks lent record amounts as Beijing lifted loan restrictions. "If China's policies are responsible for digging the global economy out of a hole earlier this year, then what happens next in China is unlikely to go unnoticed," said Andrew Wilkinson, a senior market analyst at Interactive Brokers.

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