Lending

January new loans lower than expected

New loans extended by Chinese banks in January totalled Rmb 738.1bn, down from Rmb 1,026bn in January last year and undershooting market expectations that new loans would come in at above Rmb 1tn for the month. We think the lower than expected loan growth is largely due to the Chinese New Year holiday, which fell in January this year but in February in 2011, damping commercial activity for around a week at the end of the month. In our view, the slower loan growth may point to weakening investment activity and slightly slowing growth but does not signify a sharp slowdown.

Default risks goad Beijing into loosening curbs

During 2012 authorities are set to relax restrictions they have imposed on bank support for local government financing vehicles (LGFVs) and on the property market because the rising risk of defaults among LGFV and trust companies will oblige Beijing into a softer stance. Some aspects of this predicted relaxation may be announced and some, such as a few recent initiatives, may be communicated through largely confidential “window guidance” from regulators to financial institutions.

October loans surge, officials embrace private lending

Key cyclical and structural changes are underway in China's financial system. New loans from the formal banking system surged in October, confirming Beijing's looser liquidity policy (CC Sept 8 Macro View). Credit extended from the shadow banks, however, slipped appreciably during the month, according to a China Confidential survey, and we think they will remain subdued in November. Finally, officials are giving their blessing to state-sanctioned private lenders – as distinct from unregistered underground banks – in what promises to be an important liberalisation of state financial control.

Privatisation is part of solution to LGFV debts – officials

China Confidential's conversations with senior financial officials reveals a new, breezy official attitude toward the problem of local government debt.

Into the rescue phase

Several signs are pointing to a continuation of the rescue phase in economic policy as inflationary pressures ease.

Local governments start bond issues to help indebted private firms

Foshan and Weifang, two large cities, have approved the issue of bonds to assist local small and medium enterprises hit by debt problems.

Local government bond pilot scheme announced

China's central government today announced a pilot scheme allowing select cities and regions to issue local government bonds for the first time in 17 years. The move opens the door for local governments to manage their finances more independently. It may also be considered as support for local governments suffering from mounting debts following a spending spree since 2009.

Wenzhou – where the bailouts start

The readiness of Beijing to order rescue efforts for Wenzhou companies hit by the shadow banking crisis is representative of a wider imperative to launch assistance initiatives in several parts of the economy.

Discretionary and credit spending remain strong despite pressure from higher mortgage rates

Chinese home owners are paying more in monthly mortgage interest but they are managing to increase discretionary spending by relying on more credit, according to China Confidential survey of 2,000 respondents in 236 first, second and third tier cities at the end of September.

Wenzhou credit crisis

Executives are fleeing to avoid "usurious" lending rates within the region's shadow banking system.

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09 Feb 2012

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