It sounds as though China's central bank's attempt to engineer a cooldown and end its bubble is going badly.

A research report from analyst Yuan Tuck Siew of Axia describes the carnage and confusion:

We have confirmed that banks have suspended new lending since 19 January across the country. For the seven banks we contacted in various areas of China, six said that lending has been suspended while the remaining one refused to confirm.

The suspension in lending was imposed by the authorities after an emergency meeting by the central bank's monetary policy bureau. A few aggressive lenders have received a punitive hike in their reserves ratio. Reportedly, banks lent Rmb1.1 tn during the first two weeks of this year, in line with the extraordinary lending in the beginning of last year and way above the averaging lending pace over the past ten years. In responding to such a credit surge, the PBoC has launched more aggressive quantitative tightening than we previously have thought. We would expect lending to resume from the beginning of February, but Beijing will keep a close eye on lending activities. The State Council is watching the lending figures on a daily basis, instead of the usual monthly basis. We would not surprised if banks were imposed a monthly lending quota, as against a quarterly quota in 2008 (the hard lending quota was abandoned in late 2008).



This sudden suspension in lending has caught importers, along with many other companies, by surprise and could cause turbulence in China's import orders. Letters of credit (LoC) suddenly became unavailable, despite previous agreements. We believe that this will inevitably lead to delays or cancellations in China's imports. Import orders for commodities and machineries could be affected most. Some banks suggested that they would resume issuing LoC from February, but that would be too close to the Chinese New Year. The Lunar New Year is on 14 February (China will have a seven-day holiday), and many will leave for the long holiday as early as in late January, just like the Christmas holiday in the Western world.