Reports are emerging that letters of credit (L/Cs) are once more in short supply in China.

The shortage is not caused by the global credit crisis but by the authorities. They are determined to contain an economic boom.

Credit suspension

Banks across China have been ordered to suspend new lending.

The suspension of credit was imposed in January after an emergency meeting of the central bank's monetary policy bureau.

Lending bubble

Around the middle of January, Beijing signalled that it wanted to contain what one regulator described as a massive domestic lending binge.

He was commenting on the rate of lending growth in just the first two weeks of this year. It was reportedly was some three times higher than last year's lending growth.

L/C impacts

As a result, banks have been instructed to suspend all new loans. Credit Suisse told local media that L/Cs have suddenly been withdrawn.

Other reports talk of L/Cs being withdrawn even though arrangements for them appeared solid.

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