China bars banks from funding coal, steel "zombie firms"

[BEIJING] China's banking regulator said on Friday that banks must strictly control credit to coal and steel firms that are violating capacity cuts, the latest in a series of regulations aimed at reducing loans to industries struggling with over-capacity.

The China Banking Regulatory Commission (CBRC) told banks to stop providing financial support to "zombie firms" and companies in breach of the government's capacity reduction plans, the CBRC said in an online statement.

The regulator also required banks to increase their awareness of the "strategic status" of the coal and steel sectors, and meet the "reasonable" funding demand of competitive firms.

The banking regulator said it encourages lenders to use financing for mergers and restructuring in the steel and coal sectors.

REUTERS