At the end of May, the Ministry of Finance and China Banking regulatory Commission jointly issued opinions requesting banks to further support the country's economic development and at the same time improve the capability of risk management.

The Opinions requests commercial banks to focus on borrowers' financial conditions, existing corporate guarantees, and debt levels, to prevent the accumulation of high risk loans, and to avoid losses caused by corporations' careless expansion, and to balance properly between economic development and risk control.

Today, Wang Huaqing, disciplinary secretary of the China Banking Regulatory Commission again warned that China should be cautious about possible risks in the financial system posed by the current rapid loan growth and a concentration of loans in certain industries and business.

Yuan dominated medium and long term loans changed from 13.2 trillion yuan by the end of 2007 to 15.5 trillion yuan by the end of 2008, but by the end of May 2009, the figure increased to 18.3 trillion yuan. Most of these new loans are related to projects unveiled in November's stimulus package . Given these loans are concentrated in a few industries, the concentration risk becomes evident.  In case of adverse macroeconomic environment, these banks are more prone to systemic risk, which would be likely to result in damage to the financial system.

Last month, the China Financial Stability Report 2009 issued by the People's Bank of China maintained that the development and reform of China's financial industry would face a new situation in 2009, and new challenges would be encountered in financial stability. China's financial industry will endeavor to prevent and mitigate systemic financial risks, and maintain its stable, healthy and safe performance.