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China’s banking sector is poised for a huge 300 billion yuan (£26 billion) capital-raising effort to finance the hangover from its unprecedented year-long lending binge.

The country’s biggest financial houses, industry sources say, have already begun to map out plans to raise the money and prepare themselves for an era of tighter standards and capital requirements.

China’s five largest banks are believed to have submitted plans to regulators for raising cash.

Sources at the Industrial & Commercial Bank of China — the country’s biggest financial group — said that management was toying with “several possible routes” to raise more capital.

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Bank of China said yesterday that it was “actively studying” plans to shore-up its capital levels.

China Construction Bank Corp, Agricultural Bank of China and Bank of Communications are also thought to have submitted proposals to bolster capital ratios to the China Banking Regulatory Commission.

The moves, analysts said, may be designed to pre-empt government criticism as Beijing switches its focus from re-igniting growth back to its traditional obsession with ensuring stability in the financial system.

The banks led a 3.5 per cent nosedive of Shanghai stocks, bringing the recent rally to a screeching halt. Tensions are high ahead of Beijing’s economic planning meeting — an annual government event that determines, among other things, how much liquidity should be in the system.

Bank of China shares fell 4 per cent in Hong Kong, the biggest drop in two months. Construction Bank slipped by 3.4 per cent, its steepest fall since May. ICBC and Bank of Communications also fell.

In a wake-up call to lenders, Liu Mingkang, Beijing’s most senior banking regulator, has said that banks need to defend themselves from credit risks arising from changes to the country’s industrial structure.

China's automobile market continued its robust growth in October, with passenger vehicle sales clocking a year-on-year growth of 79.6 percent, and provided enough indications that the country is well on its way to occupy the top perch in the global automobile market.

Sales of cars, sports-utility vehicles, minivans and multi-purpose vehicles touched 923,154 units last month, said Rao Da, secretary-general of China Passenger Car Association on Friday in Shanghai.

During the first 10 months, passenger vehicle sales surged nearly 52.4 percent over the same period last year to 8.08 million units.

"The government's favorable tax policy and the eight-day National Day holidays spurred sales in October. The robust trend was also aided as vehicle manufacturers produced more popular models during the period and reduced the delivery time," said Rao.

"We are optimistic that the November figures would surpass that of October as sales normally peak toward the end of the year," he said.

China's automobile industry has been growing robustly since the end of last year and is now the most dynamic and promising market in the world.

"More importantly, by the end of November, total vehicles sales in China will surpass the 12-million-unit target, set by the government under its automobile industry restructuring plan of last year, some 25 months in advance," said Rao.

"We expect full-year automobile sales to touch 13.5 million with a year-on-year growth rate of 44 percent. That in turn, would make China the world's largest automobile market for the whole year."

Rao said if the government can continue its stimulus package for the automobile industry, the growth rate for the 2010 could reach 25 percent.

On Thursday, Zhu Hongren, spokesman of the Ministry of Industry and Information Technology, said the government is considering extending the favorable tax policies and the subsidy for automobile purchases in rural regions to next year also. The policies were scheduled to end this year.