No signs of monetary policy loosening for foreign banks

The South China Morning Post reports that China has cut medium-term and long-term debt quotas used to fund real estate and energy intensive products for foreign banks operating in China. With regards to short-term lending, quotas were also cut for trade financing and working capital. The new quotas are valid until March 31 of 2009.

The Red Cat Journal has previously speculated on the possibility of more flexible macroeconomic policy for China. The tighter quotas would, in contrast, be more consistent with a further tightening of monetary policy and the government’s own official statements that it will continue to maintain a “tight” monetary policy.