China Construction Bank

Fresh loans down at big four state banks

New lending falls in December, leading to hopes that mainland has turned a corner in its efforts to put the brakes on a lending binge

PUBLISHED : Wednesday, 09 January, 2013, 12:00am
UPDATED : Wednesday, 09 January, 2013, 4:08am

The "big four" state-controlled banks doled out fewer new loans last month than in November, spurring hope that mainland banks might have put the brakes on lending.

The four - Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China - extended a total of 164 billion yuan (HK$201.66 billion) in new loans last month, down from November's 168 billion yuan and October's 220 billion yuan, Xinhua's Economic Information Daily reported on Monday, citing unnamed sources.

As loans from these four typically account for 30 to 40 per cent of the mainland's total bank lending, many economists estimate the total new loans in December were about 500 billion yuan, and 8.3 trillion yuan for the whole of last year.

Song Yu, an economist at Beijing Gao Hua Securities, said: "Around 500 billion yuan in new loans, compared with 522.9 billion yuan in November, would mainly reflect the cautious approach of the monetary authorities."

Last month the central bank said it would focus on "controlling risks" in the financial system and seek "stable and appropriate" growth in financing this year.

Banks on the mainland extended 7.75 trillion yuan of new loans in the first 11 months of last year, already surpassing the 7.47 trillion yuan for the full year of 2011, when policymakers encouraged funding of construction projects to spur economic growth.

Rising lending in the mainland's banking and shadow banking systems has prompted worries about the quality and stability of loans.

But Lu Ting, an economist at Bank of America Merrill Lynch, said the estimated 500 billion yuan of new loans was still quite high as funding demand tended to taper off towards the end of the year.

"Seasonally adjusted loan demand could have remained robust as the government has sped up infrastructure project approvals and private sector confidence has been improving," Lu said.

He said total social financing, aggregating corporate bonds, equities and loans, might have grown 19.7 per cent in December from a year ago - slightly slower than the 20.2 per cent increase in November - because of softer financing demand at the end of the year.

The leadership transition has made it difficult to predict this year's loan target. Many economists have forecast it to be around 8.5 trillion yuan as the top leadership has indicated it will maintain "policy continuity". However, the official Shanghai Securities News quoted unnamed sources as saying last month that the target could be as high as 9 trillion yuan, in view of the new regime's focus on boosting economic growth following the slowdown in 2012.