China’s big 4 banks new lending reached RMB70 billion in the first half of August20 August, 2012, 11:54. Posted by Zarathustra
China’s big 4 banks (Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China) may have lent about RMB70 billion according to Shanghai Securities Journal. This is a significant increase from about RMB50 billion for the first half of July, and RMB25 billion in the first half of June.
The increase in new lending is largely attributable to increase in home mortgages, consistent with the recent pick up in real estate market activities. Other than that, however, short-term bills financing remains the major part of new lending to non-financial corporations, while medium- to long-term loans remains relatively small, similar to the past few months. The lack of interest to take medium- to long-term loans could be interpreted as the lack of interests from corporate China to invest in long-term projects, which does not bode well for investment. This is, however, consistent with our view that demand for credit should remain weak, especially from the private sector corporations.
Since we do not have the exact break-down of new loans at the moment, it is difficult to determine whether this is actually a good news or not. If mortgages were the main driver of the increase, that is probably a reflection of the recent pick-up of real estate market activities, which is not necessarily a good news at the time as the government is still concerned about the rebound of the real estate prices. Also, while big 4 banks increased lending, apparently not all banks have increased lending in-line with the big 4 banks according to the report.
Recently, China Construction Bank has decided that lending to projects for growth stabilisation is a higher priority for the bank, which is consistent with a proposal we learnt about earlier regarding lending to local government financing vehicles (and indeed some have started increasing lending to local governments). The actual impact of local governments’ version of “RMB4 trillion” on future loan growth, however, remains to be seen.