One of China's big four state owned banks is making it more difficult for importers to obtain letters of credit (L/Cs) for iron ore.

The Bank of China - which is also China's biggest L/C provider for iron ore imports - is making the move in the wake of the government's crackdown on the use of imports as collateral for financing.

Local quotas

Reports suggest that quotas of L/Cs for iron ore are now set by the Bank of China's provincial headquarters for local branches in their respective province.

This means that some branches and their customers are finding it more difficult to open L/Cs for iron ore imports.

Stockpiling control

The Bank of China has also ordered local branches not to open L/Cs for importers that have not found a buyer for iron ore. This is intended to limit stockpiling.

Meanwhile, the China Banking Regulatory Commission has ordered banks to step up risk controls in respect of L/Cs used as collateral for financing.

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