For those who have an excessive number of credit cards and whose total credit limit exceeds their ability to repay, applications for new cards will be suspended, according to a new regulation of the China Banking Regulatory Commission (CBRC). The new regulation requires banks to carry out a strict approval procedure before issuing cards and banks have to confirm the valid identities of cardholders.

Banks have been fighting with each other in an effort to grasp as much market share as they can amid the cutthroat competition in the market.

The CBRC aims to crack down on the excessive issuance of credit cards, which increases the potential credit and operating risks of commercial banks.

Financial experts suggest that three cards are enough for ordinary citizens, as an excessive number of credit cards will heighten the risk of credit card fraud.

Indian Iron Ore Duties May Not Hurt Too Much

From March 1, India began to impose export duties on its iron ore of up to 300 rupees (about 53 yuan) per ton. The duties are expected to be paid by iron ore importers.

"China's imports of iron ore from India will drop following the levy of export duties," claimed Liu Zhenggang, a senior manager with China Minmetals Corp., China's largest minerals trading company. "The export duties only make Indian iron ore less competitive in price and are forcing buyers to turn to other countries."

Currently, 80 percent of Indian iron ore is exported to China. However, India is now only the third largest iron ore supplier to China, following Australia and Brazil.

Luo Wei, analyst with China International Capital Corp. Ltd., contended that Indian export duties won't have much effect on the profitability of Chinese iron and steel companies. "Domestic iron and steel companies have a high requirement for quality and they prefer iron ore from Australia and Brazil," he said. In 2006, Luo pointed out, Brazil took over India's position as the second largest iron ore exporter to China.

Bank Loans Unchecked

In spite of the central bank's efforts to tighten the money supply, banks have not gone along, as they continued to expand their lending.

In February, new yuan-denominated loans totaled 413.8 billion yuan, 264.7 billion yuan more than a year earlier. The central bank has set a limit on new bank loans of 2.9 trillion yuan this year. Total loans in January and February accounted for 34 percent of this target.

"This figure far exceeds our expectation; it means that the money supply is abundant," said Ma Qing, analyst with CITIC Securities. He pointed out that the excessive liquidity problem cannot be solved overnight, though the central bank has raised banks' reserve requirement ratio and issued 140 billion yuan in notes to drain liquidity.

Liu Mingkang, Chairman of the CBRC, warned of the misuse of bank loans for stock market speculation and said the central bank should bar excessive bank lending.

To date, the central bank has preferred to raise the reserve requirement ratio rather than interest rates to soak up excess liquidity. However, the new financial report, featuring rapid growth in bank loans and a rise in the M1 money supply, might trigger the central bank to raise interest rates, analysts said.

"Hot Money" Jacks Up Trade Surplus

China's February trade surplus is indeed astonishing, surging almost 50 percent from January (see graph).

Despite the Ministry of Commerce's determination to curb the ballooning trade surplus, it still fell way short of achieving its goal.

Minister of Commerce Bo Xilai said China is not seeking a large trade surplus and pointed out that there are non-trade-related reasons for the trade surplus.

International hot money is one critical reason.

Hu Huaibang, Commissioner of Discipline Inspection of the CBRC, said that according to research, Chinese exports since 2003 may include "fake elements," thus giving rise to "fake trade," or trade on paper only.

The "fake trade" tends to bring foreign currencies into China through the current account, and then the money is invested in China's currently lucrative real estate and stock markets.

"In order to crack down on 'fake trade' and squeeze the trade bubble," Hu said, "We should impose special inspections on four major trading categories with unusual import and export balances in recent years: hi-tech products, machinery and transportation facilities, textile products, and rubber, mining and metallurgy products."

"It takes time to adjust, and should be done in a slow and gradual manner," commented Zhou Xiaochuan, Governor of China's central bank, noting that China will continue its efforts to reduce the surplus.

CPI Up in February

In February, the consumer price index (CPI) rose 2.7 percent compared with the same month of the previous year, according to the National Bureau of Statistics.

Considering that February included the Chinese Spring Festival period, economists agreed that the increase was moderate.