SINGAPORE, June 5 (Reuters) - China has warned its banks over excessive loans to some steel trading firms that have used the funds to speculate on property and stocks, the Financial Times reported, citing the China Banking Regulatory Commission.
The trading firms had borrowed to finance steel-related projects, but because of modest demand for the metal, they had used the money for risky investments instead, the newspaper said, citing a directive issued by the banking regulator on April 26.
“This has led to a huge amount of financing in the steel market and, as risks emerge, it could cause a large amount of bad bank loans and major harm to financial safety,” the newspaper reported, quoting the regulator as saying.
The newspaper did not identify the trading companies.
Chinese steelmakers, which produce around half of the world’s output, lost about 1 billion yuan ($157.12 million) in the first quarter because of weak demand.
The country’s first-quarter economic growth was the weakest in nearly three years, data from the National Bureau of Statistics show. ($1 = 6.3645 Chinese yuan) (Writing by Manolo Serapio Jr.; Editing by Ryan Woo)