Banks started cranking open the loan spigot in late 2008, although experts say the enthusiastic credit pace won’t last for long.
Wen Xiu, Caijing 4 February 2009
Chinese banks issued about 1 trillion yuan in new loans in January, but many observers including bankers question whether the rapid lending pace can continue as 2009 matures.
Banks are taking a cautious approach to loans, even while being encouraged to support the government’s economic stimulus efforts by opening the credit spigot.
One corporate banking executive at a large, commercial bank said, “Banks will not alter their lending philosophy.”
Nevertheless, a banking source told Caijing some large commercial banks reported “a big jump in lending” in January over the same period last year.
Premier Wen Jiabao stated recently that new lending totalled 900 billion yuan in the first 20 days of the new year, while separately a report by Morgan Stanley predicted loans would top 1 trillion yuan in January.
Chief economist Wang Qing of Morgan Stanley said nationwide lending had increased at a rapid, 19 percent rate through the last two months of 2008.
But a report by Wang’s firm concluded this steep growth rate could not be sustained in coming months. The commercial banker shared this view, citing three reasons why the recent spurt would be hard to duplicate.
One reason is that the credit spike was helped by several previously planned projects that will not be repeated, the banker said. These projects were launched immediately after the central bank lifted a restriction on total lending volume.
Moreover, the banker said, most banks are under pressure to maintain profit levels, despite surplus liquidity.
Bankers also worry that competition for loan customers will increase in the future if the government eliminates controls on loan interest rates.
Zhou Zhongming, chief of the Shangdong Province Banking Regulatory Bureau, said near-term lending volume would depend on to what extent the economy recovers in the second half of the year.
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China’s Lending Topped 1 Trillion Yuan in January
Banks started cranking open the loan spigot in late 2008, although experts say the enthusiastic credit pace won’t last for long.
Wen Xiu, Caijing
4 February 2009
Chinese banks issued about 1 trillion yuan in new loans in January, but many observers including bankers question whether the rapid lending pace can continue as 2009 matures.
Banks are taking a cautious approach to loans, even while being encouraged to support the government’s economic stimulus efforts by opening the credit spigot.
One corporate banking executive at a large, commercial bank said, “Banks will not alter their lending philosophy.”
Nevertheless, a banking source told Caijing some large commercial banks reported “a big jump in lending” in January over the same period last year.
Premier Wen Jiabao stated recently that new lending totalled 900 billion yuan in the first 20 days of the new year, while separately a report by Morgan Stanley predicted loans would top 1 trillion yuan in January.
Chief economist Wang Qing of Morgan Stanley said nationwide lending had increased at a rapid, 19 percent rate through the last two months of 2008.
But a report by Wang’s firm concluded this steep growth rate could not be sustained in coming months. The commercial banker shared this view, citing three reasons why the recent spurt would be hard to duplicate.
One reason is that the credit spike was helped by several previously planned projects that will not be repeated, the banker said. These projects were launched immediately after the central bank lifted a restriction on total lending volume.
Moreover, the banker said, most banks are under pressure to maintain profit levels, despite surplus liquidity.
Bankers also worry that competition for loan customers will increase in the future if the government eliminates controls on loan interest rates.
Zhou Zhongming, chief of the Shangdong Province Banking Regulatory Bureau, said near-term lending volume would depend on to what extent the economy recovers in the second half of the year.
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