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China on alert for asset bubbles

Chinese regulators yesterday warned banks to ensure unprecedented volumes of new loans are channelled into the real economy amid concerns that banks ignored basic lending standards in the first half of the year. Over 7,370bn yuan was issued in new loans during the first six months of 2009, more than twice the amount lent in the same period a year earlier. Regulators cautioned against loans being diverted into equity or real estate markets, where officials say fresh asset bubbles are forming. The Chinese government has reduced the minimum downpayment requirement to 20 per cent from 30 per cent for homebuyers. But regulators are pushing for homebuyers to make a downpayment of 40 per cent of the purchase price.