China banks hit for illicit loans

Loans to two state bodies were used in share speculation

China's banking regulator has punished eight banks for illicity lending money to two state bodies that invested the cash in the stock and property markets.

The China National Nuclear Corporation and China Shipping Group illegally used the billions of yuan loaned to them.

The China Banking Regulatory Commission (CBRC) has now punished 18 executives involved in the lending with penalties including warnings and fines.

Authorities fear increased speculation may lead to a stock or property bubble.

BANKS INVOLVED IN LOANS Bank of Communications China Merchants Bank Industrial and Commercial Bank of China Bank of China Industrial Bank China CITIC Bank Bank of Beijing Shenzhen Development Bank

"The announcement indicates that the government is still worried about a possible overheated stock market as the index continues to rise quickly above the 4,000-point level," said Zheng Weigang, senior analyst at Shanghai Securities.

'Isolated incidents'

Eighteen people from branches of Bank of Communications and Bank of Beijing were issued with reprimands, given fines, or both.

The CBRC fined the Dongdaming branch of China Merchants Bank 1.69 million yuan (£221,500; £117,000) and banned it from corporate lending for half a year. The other five were fined up to 500,000 yuan each.

It also said the State-owned Assets Supervision and Administration Commission would punish China Nuclear and China Shipping.

But the banking regulator said the cases found were isolated and did not reflect widespread illicit lending for the purposes of speculative investments.