Central bank reports rise in lending to small firms
New figures from the central bank show loans have become more accessible to small firms and subsidised housing developments, but analysts believe credit is much tighter than the figures suggest.
The People's Bank of China said in a report released yesterday that the proportion of loans extended to small and medium-sized enterprises (SMEs) and subsidised housing projects increased in the first half of the year. Lending to the overall property sector, however, slowed from the first quarter.
New loans to SMEs reached 1.58 trillion yuan (HK$1.9 trillion) in the first half, accounting for 64.5 per cent of all loans extended to companies, up 1.6 percentage points compared with the first quarter.
Loans to only small companies showed significant increase, accounting for 35.2 per cent of loans extended to businesses.
The figures run counter to the experience of private firms operating outside the state-run financial system. The market has been awash with stories of private enterprises facing a credit crunch as a result of Beijing's tightening efforts.
'It's not a matter of the PBoC lying about the figures, it's just that the central bank has very different standards as to what qualifies as SMEs,' said Yao Wei, China economist at Societe Generale.
'Normally what qualifies as a small or mid-sized company for the central bank could be a huge company by other standards.'
Sheng Nan, an analyst at UOB-Kay Hian, said the situation was much grimmer on the ground in coastal cities, which have a heavy presence of small factories and companies.
While annual interest rates of 12 to 15 per cent for credit were common, some companies on the coast have reported paying monthly rates of up to 30 per cent, Sheng said.
The central bank said in the report that lending to the property sector continued to drop, but loans for subsidised housing projects showed fast growth.
Outstanding property loans increased 16.9 per cent in the first half against a year earlier, down 4.4 percentage points from the growth recorded in the first quarter.
New loans for subsidised housing developments in the first half reached 90.8 billion yuan, up 54.8 per cent from the beginning of this year. The growth was also 48.3 percentage points higher than that of total property development loans in the same period.
But Yao of Societe Generale said that compared to estimated needs, which stood at 1.4 trillion yuan this year, available bank loans were just a drop in the ocean.
Yao said investment in property development grew by 30 per cent in the first half. To meet the government's goal for additional units, subsidised housing developments had to take up at least 20 per cent of that growth. But actual figures are closer to 10 per cent.
The mainland issued 4.17 trillion yuan of new loans in the first half, bringing total outstanding loans to 51.4 trillion yuan, an increase of 16.9 per cent from the same period last year.