China’s big 4 banks doubled lending in first half of July19 July, 2012, 17:44. Posted by Zarathustra
Shanghai Security Journal reports that new loans extended by big 4 banks in China for the first half of July amounted to about RMB50 billion.
Last month, as we noted, big 4 banks only lent RMB25 billion in the first half of June, thus the current pace of RMB50 billion lending in the first half of the month is the double of the pace of lending for the previous month. This is a significant improvements on loan growth relatively to the previous months when lending was slow every month except for the last week.
The increased rate of lending is attributed to the increase in lending to fund projects which are aimed by the government to stabilise growth. Banks are not totally enthusiastic about new drive to lend according to the report as they are wary of increasing risks of bad loans as in the last round of the stimulus.
As we have repeatedly stressed for a few months now, demand for credit in the private sector has been, and will probably remain slow, thus government directed lending (or as we called it, banks being forced by the government to lend to state-owned enterprises) will play a bigger role in credit growth, as it is apparently in this data point in July. The government is hoping to ensure that the economy has indeed bottomed in the second quarter, as state media has repeatedly said and as the market consensus are led to believe.
As far as economic growth is concerned, this is a piece of good news, which bode well for the optimists who are convinced about the second half recovery of economic growth (something that we have doubts). However, increase in lending to fund investment is certainly not helping with rebalancing the economy.