Reports some banks in China have been told to stop all lending for the remainder of January sent the Australian share market falling about 30 points in a little over an hour.

The China Securities Journal on Wednesday quoted unnamed banking sources as saying some banks had been told to stop all lending, including short-term bills, for the rest of the month, Reuters reported.

The Chinese report said big branches of the Bank of China received a message from their headquarters to stop all bill issuance until further notice, the newspaper cited one unnamed source as saying.

“Obviously the Chinese economy is flying and there are some concerns out there it could overheat and we will get asset bubbles and that sort of thing,” said IG Markets research analyst Ben Potter.

The Australian bourse fell heavily amid the news, with the benchmark S&P/ASX 200 index falling from 4904 points at 1150 AEDT to 4874.6 points at 1300 AEDT.

“What China is doing is one way to try and slow down the growth story there a little bit,” Mr Potter said.

The materials sector in Australia, which had been up, reversed its gains after the news.

“In terms of the Australian miners it is going to be met with selling in the short term, but in the long term this is a good thing,” Mr Potter said.

“If you let a massive bubble form in China and it crashes, that is a lot worse than having the government rein back growth now and then extend the economic growth in the long term,” he said.

At 1408 AEDT the S&P/ASX 200 was trading at 4879.6 points, up 18,4 points, or 0.38 per cent.

AAP