From Forexlive:
China’s biggest provider of letters of credit for iron ore imports (Bank of China) is making it much harder for importers amidst a government crackdown on the use of imports as collateral for financing, according to an unnamed official at Bank of China:
- Monthly lending quotas have been centralized to the provincial level
- The China Banking Regulatory Commission has ordered banks to step up risk controls
- “… provincial headquarters sets a quota for local branches in Shandong province. We don’t decide anymore and, of course, the quota is much smaller than previous ones … it’s becoming very, very difficult to open letters of credit for iron ore”
- The Bank of China has also ordered local branches not to open letters of credit if importers haven’t found a buyer for the to-be-imported ore – this will limit stockpiling
This can only be bad for prices and encourage renewed destocking.
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