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China Said to Propose Limits on Local Government Loans

China’s banking regulator proposed keeping a cap on local government loans to curtail defaults while encouraging funding for railways, roads and affordable homes, a person with direct knowledge of the matter said.

The China Banking Regulatory Commission suggested limiting loans to local government financing vehicles to levels reached at the end of 2011, according to a person with knowledge of the matter who asked not to be named because the proposal is confidential. The watchdog made the recommendation in a report sent to the cabinet after Premier Wen Jiabao’s call last month for the government to focus on growth, the person said.