Hong Kong becomes the lender for Chinese firms

This is amidst the central government’s attempt to lower the inflation rate.

A Bloomberg report said Chinese companies are borrowing record amounts from Hong Kong’s banks as the central government tries to bring the inflation rate down from a three-year high by reducing access to credit.

“Financial institutions’ claims on mainland companies rose four-fold to 1.6 trillion yuan ($250 billion) between mid-2009 and the end of May, Hong Kong Monetary Authority data show. They will provide another 700 billion yuan to 1 trillion yuan of loans to mainland firms in the second half of 2011, according to Fitch Ratings. The money isn’t included in the central bank’s estimate of total lending in the economy. China’s loans fell to their lowest level in a year in July,” said the report.

According to the report, Chinese policy makers have introduced loan quotas and higher reserve requirements in their bid to curb inflation, which quickened to 6.5 percent in July, compared with 3.6 percent in the U.S. and 2.5 percent in the euro region.

View the report here.