China shares down on lending growth jitters

Chinese shares suffered their sharpest one-day drop in two weeks amid unease Wednesday about rapid growth in lending by China's banks and an easing of optimism about an economic revival.

The benchmark Shanghai Composite Index lost 74.48 points, or 2.9 percent, to close at 2461.35, its sharpest decline since falling 3.8 percent on April 8. The Shenzhen Composite Index for China's smaller second exchange declined by 4.3 percent to 819.14.

Investors were concerned whether China's banks could maintain the recent rapid pace of lending they have established as they boosted credit to support a government stimulus plan, analysts said. Hopes that some of the added liquidity would flow into the stock market has helped to push up stock prices.

The lending-driven rally was fragile and investors were sensitive to any hint of changes, said Wu Feng, analyst for Tx Investment Consulting in Shanghai.

"The market has already responded big enough on the short-term economic revival. At such a high level, investors turned to be cautious," Wu said.

Heavy selling took place across the board.

China Shenhua Energy Ltd., the country's biggest coal producer, dropped 4.3 percent to 22.72 yuan as resource shares dropped for a second day following a big recent rise. Anhui Hengyuan Coal industry Co. tumbled 8.8 percent to 18.07 yuan.

PetroChina Ltd., Asia's biggest oil and gas producer, fell 1 percent to 11.71 yuan, and China Petroleum & Chemical Corp. sank 4.4 percent to 9.62 yuan.

Jiangxi Copper Ltd., the country's second-biggest metals producer, swooned 6.1 percent to 23 yuan, and Aluminum Corp. of China, or Chalco, skidded 4.2 percent to 10.34 yuan.

China United Telecommunications Ltd. gained 3.1 percent to 6.27 yuan after the company announced higher customer numbers in March.

In currency markets, the yuan weakened to 6.8298 to the U.S. dollar, down from Tuesday's close of 6.82762.

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