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M&A loans could transform industry but also risky

(Xinhua)
Updated: 2009-06-24 14:40

Chinese banks had extended 13.6 billion yuan ($1.99 billion), as well as $420 million worth of loans for mergers and acquisitions (M&A) as of the end of May, a senior official with the national banking regulator said Tuesday.

Related readings:  Leading banks report lending violations  China's CPI falls, lending spree eases  New loans may reach 6.5t yuan in first half  China's bank credit expanded in May

Cai Esheng, vice chairman of the China Banking Regulatory Commission, told a forum on M&A that the loans would support domestic and foreign deals worth 42 billion yuan and $840 million in all.

He also warned that such loans could pose a risk, if M&A funding grew too fast. At the same time, he said, there were benefits.

"Acquisition loans would facilitate industrial upgrading, acquisitions in different industries and economic structure transformation."

China lifted restrictions on such loans at the end of last year. The loans described by Cai covered industries including steel, power, mining, machinery manufacturing, pharmaceuticals and telecommunications.